Proposition 19: Your Kids Inheritance & Property Tax

Proposition 19 is one complicated piece of legislation. It is difficult to explain without a brief discussion of the backstory.  County assessors administer the assessment of your real property.  Proposition 13, passed in 1978, limits the property taxes to 1% of the assessed value of the property.  It also limits assessment to a 2% increase unless there is a change in ownership or construction – in which case there is an assessment. 

Propositions 58 and 193 exclusions were also created which allowed property to transfer between family members including parents and children (58); grandparent to grandchild (193).  Propositions 60 and 90 allow homeowners 55+ years of age to 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

The year that the property is assessed for property tax purposes is referred to as the “base year.”  The assessed value is generally the sales price. Thus, if grandma and grandpa bought their home for $300,000, the base year value is $300,000.  Property tax will be calculated based upon $300,000. If grandma and grandpa sold that same property in 2021 for $1,5000,000 the property would be assessed at $1,500,000.

Prior to Proposition 19 grandma and grandpa could leave the home to a grandchild, and the house would be excluded from reassessment, resulting in an enormous savings on property tax. Now that Proposition 19 is in effect, the grandchild would not be excluded, subject to some exceptions.  The County would assess the property upon the transfer to the grandchild, except under some very narrow circumstances.
 
Questions on how this may affect your home or homes? Call me for a consultation.