Proposition 19 Brings Significant Changes to Property Tax Rules for Inter-County and Inheritance Transfers
Here is the most recent publication from the California State Board of Equalization (BOE), dated April 1, 2022:
BOE Proposition 19 Fact Sheet
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, passed
in 1978, 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: Prior to April 1, 2021, homeowners 55+ years of age could sell their primary residence and transfer the base year value of that property to a replacement residence if certain conditions are met. Proposition 60 applied to intra-county transfers, while Proposition 90 applied to inter-county transfers under certain conditions.
- Proposition 110: Prior to April 1, 2021, severely and permanently disabled persons could transfer the base year value of their primary residence to a replacement residence if certain conditions were met.
Proposition 19 Expands Certain Transfer Benefits
Homeowners who are 55 or older, or who are severely and permanently 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.
- 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 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.
However, family farm transfers are allowable for this exclusion without the principal residence requirement. (RTC section 63.2(e)(4) defines a "family farm" as any real property that is under cultivation or being used for pasture or grazing or to produce any agricultural commodity. The term "agricultural commodity" is defined in Government Code (GC) section 51201 as any and all plant and animal products produced in California for commercial purposes).
There is a limit to the value that can be excluded for a family home or each legal parcel of a family farm. The value limit is equal to the property’s taxable value (factored base year value) at time of transfer plus $1 million. If the market value exceeds this limit, the difference is added to the taxable value.
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 former 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 Prior versus New Provisions
Allowed 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|
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 allowed 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 and permanent disabilities can transfer their tax assessments to three times and no limit for disaster victims.
No value limit on the transfer of the principal residence to child/grandchild
No value limit
- No adjustment to
transferred base year value if the replacement property is of equal or lesser
value than the original property's market value. “Equal or lesser value” means:
- 100% if replacement purchased/newly constructed prior to sale
- 105% if replacement purchased/newly constructed in first year after sale
- 110% if replacement purchased/newly constructed in second year after sale
- Amount above “equal or lesser value” is added to transferred value
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.
Proposition 19 applies to Parent-Child/Grandparent-Grandchild transfers completed
after February 15, 2021* and base value transfers involving people over 55, severely and permanently disabled, or disaster victims completed after March 31, 2021.
Qualifying parent/child (grandparent/grandchild), transfers completed prior to February 16, 2021, will be subject to the prior more permissive rules.
Conversely, qualifying base year value transfers completed April 1, 2021 or later will be subject to Proposition 19’s rules that
are more permissive.
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.
Prop 19 Frequently Asked Questions
The Frequently Asked Questions and Answers, accessible through the links below, have been taken from the
CA BOE Prop 19 Legal Analysis 1.8.2021 and abbreviated.
Applications must be filed in the county where the transaction is completed. For Sacramento County property owners, forms can be directly accessed below:
Sacramento County property owners with questions are encouraged to contact the Assessor’s Property Transfer Section at
Prop19@saccounty.net or (916) 875-0750.