Prop 19 and how it impacts you
On November 3rd, 2020 California voters approved Proposition 19. This measure has two distinct parts.
(1) The first allows homeowners who are 55 or older, disabled, or lost their home in a natural disaster to transfer their tax base up to 3x anywhere in California.
(2) The second part outlines the requirements for retaining tax basis in family transfers, which now is limited to transferring a primary residence to a child or grandchild for continued use as a primary residence.
When does this go into effect?
(1) Beginning April 1, 2021, Proposition19 applies to the transfer your tax basis anywhere in the State of California regardless of value.
(2) Beginning February 16, 2021, the family transfer rules take effect.
What does this mean for inheritors?
Inheritors who receive a primary residence from a parent or grandparent will be able to retain the same tax base so long as the property continues to be used as a primary residence. In addition, the residence (family farms are exempt) is subject to some upward adjustments if the new property value is more than $1M over the original tax basis.
What does this mean for homeowners?
Homeowners can transfer the tax basis of a sold primary residence to a replacement primary residence up to 3x. These transfers are unlimited for those whose homes were destroyed or substantially damaged by a fire. If the replacement home is equal or of lesser value, the tax base remains the same. The sale of the original home must happen within two years of buying the replacement residence, and homeowners can purchase their new residence before their current residence sells.
What if the replacement home is more expensive?
If the replacement home is of greater value, the new tax base follows this formula:
[value of new home – value of old home] + [old tax base] = [new tax base]
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