Sacramento, CA. December 17, 2020 - Sacramento County Assessor Christina Wynn
announced today that preparations to implement Proposition 19 are underway. In
November 2020, California voters passed Proposition 19, which modifies Article XIIIA (aka
Proposition 13) of the California Constitution and significantly affects certain types of real
property transfers.
Proposition 13 limits annual increases in assessed values to a maximum 2% except when
there is new construction and/or a transfer of ownership. Over the years, California voters
passed several propositions excluding certain transfers of ownership from reassessment
under Proposition 13:
- Propositions 58 and 193: Excludes transfers between parent and child (58) or grandparent
and grandchild (193) from reassessment.
- Propositions 60 and 90: Homeowners 55+ years of age can sell their primary residence
and transfer the base year value of that property to a replacement residence if certain
conditions are met. Proposition 60 applies to intra-county transfers, while Proposition 90
applies to inter-county transfers under certain conditions.
- Proposition 110: Severely disabled persons can transfer the base year value of their
primary residence to a replacement residence if certain conditions are met.
Proposition 19 Expands Certain Transfer Benefits
Homeowners who are 55 or older, or who are severely disabled, or who are victims of a
Governor declared disaster, wishing to transfer their property tax benefits, to another
home in California will have more options:
- A homeowner can purchase a higher value property. The transfer no longer will have
to be a property of equal or lesser value. The prior benefit can be transferred and an
upward adjustment is added for the difference.
- An inter-county transfer can occur between any two counties, not just counties with
local ordinances.
- A qualifying transfer can be made up to 3 times, not just once and for Governor
declared disaster victims, there is no limit on the number of times the benefit can be
used.
Proposition 19 Eliminates and Reduces Certain Inheritance Benefits
Children/grandchildren who inherit their parents’/grandparents’ principal residence or
family farm but choose not to make the home their principal residence will now have the
property re-assessed. Heirs must now file and qualify to receive the Homeowner’s
Exemption or Disabled Veterans’ Exemption within one year of transfer of ownership.
Further, parents/grandparents can no longer transfer up to $1,000,000 of other property,
such as residential rental property or commercial property, in addition to their principal
residence. This reset of the assessed value to fair market value can significantly increase
the assessed values as the value differences from base year 1975 properties to current
value can be significant.
For example, a family property currently assessed for $50,000 with an annual property tax
of approximately $600 could now be re-assessed to current market value at $750,000
resulting in an annual property tax of approximately $9,000. This significant property tax
increase could affect the feasibility of ownership of inherited family properties.
This may also impact common estate planning trusts like qualified personal residence
trusts which allows the transfer of a residence to a trust while that residence can still be
occupied for a fixed number of years. The parent continues to live in the residence as
their primary residence, and at the end of the fixed number of years, the residence
transfers to their child. Under existing law, when the child becomes the owner, they would
qualify for the parent-child exclusion but under Proposition 19 the child would have to
make the residence their primary residence or the property would be reassessed. Those
with a trust that holds a residence in the name of their child as a remainder
beneficiary or those in the process of estate planning should contact a tax and estate
planning professional to discuss potential impacts.
Quick Comparison Chart of Current versus New Provisions
Allows persons over 55 or with severe disabilities to transfer their tax assessments to a property of equal or lesser value either a) within a county (Proposition 60) or b) to another county if the county has authorized such a transfer by ordinance (Proposition 90). This was limited to 10 counties:
1. Alameda
| 5. San Bernardino
| 8. Santa Clara
| 2. Los Angeles
| 6. San Diego
| 9. Tuolumne
| 3. Orange
| 7. San Mateo
| 10. Ventura
| 4. Riverside
| | |
| Allows persons over 55, persons with severe disabilities, or victims of Governor-declared disasters can transfer their tax assessment anywhere within the state and allows the assessment to be transferred to a more expensive home with an upward adjustment.
|
Proposition 60/90 allows for only one transfer by persons over 55 years old or with severe disabilities.
| Increases the number of times that persons 55 years old or with severe disabilities can transfer their tax assessments to three and no limit for disaster victims.
|
No value limit on the transfer of the principal residence to child/grandchild
| Benefit is now limited to an additional $1,000,000 with an upward adjustment for amounts over the limit. Example: Let's say the market value of your home is $1,800,000 and the taxable value on your tax bill is $500,000. Your new taxable value after the transfer would be: $1,800,000 market value - ($500,000 Taxable Value + $1,000,000) = $300,000 over $300,000 overage + taxable value of $500,000 = new taxable value is $800,000.
|
Can transfer up to $1,000,000 of other property in addition to the principal residence.
| Other property is no longer eligible for this benefit, only the principal residence or family farm can qualify.
|
No principal residence requirement for child/grandchild.
| Child/grandchild must occupy the property as their principal place of residence and qualify for either a homeowner's exemption or disabled veterans' exemption within one year of the transfer.
|
Timing
Proposition 19 applies to Parent-Child/Grandparent-Grandchild transfers completed
after February 15, 2021* and base value transfers involving people over 55 or severely
disabled or disaster victims completed after March 31, 2021.
Those who are concerned with re-assessment under Proposition 19 can complete a
parent/grandparent-child/grandchild transfer no later than February 15, 2021* and apply
for exclusion from re-assessment under Proposition 58 and 193 requirements. Qualifying
transactions completed prior to February 16, 2021, will be subject to current more
permissive rules.
Conversely, qualified individuals wishing to transfer their property tax benefits to a more
expensive home and/or to a county not previously listed under Proposition 90 may elect
to delay closing the transfer until April 1, 2021 or later. Qualifying transactions
completed April 1, 2021 or later will be subject to Proposition 19’s more permissive rules.
It is important to note that transfers and sales of property may have income tax
consequences and it is recommended that you consult an income tax professional
in advance.
*IMPORTANT: Due to County holidays, the Sacramento County Recorder’s Office and
Assessor’s Office are closed Friday, February 12, 2021 and Monday, February 15,
2021; therefore ownership documents should be recorded as soon as possible.
Unknowns
The language of Proposition 19 will need some legislative clarification particularly with
regards to the definitions of family farms and the principal residency requirement, partial
interest transactions, and multi-heir transfers.
Questions
For more detailed information, please visit our Proposition 19 Assessor Webpage. We will
be updating the webpage as new information becomes available. Sacramento County
property owners with questions about Proposition 19 are encouraged to contact the
Assessor’s Property Transfer Section at Prop19@saccounty.net or (916) 875-0750 as soon
as possible.
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