Prop 19 Transfer Exemption in Effect Feb. 16

Proposition 19, supported by the California Association of REALTORS® (C.A.R.), allows homeowners who are 55 and older, people with severe disabilities, wildfire or natural disaster victims to transfer their current property tax base to a replacement home anywhere in California.

Beginning Feb. 16, 2021, Prop 19 also changes the rules on exemptions from reassessment for intergenerational transfers by limiting the exemption to the transfer of a primary residence to a child (or grandchild) only when the property continues to be used as a family home by the child (or grandchild). Even then, if the divergence between the taxable value and the actual value is too great, a partial increase in the new taxable value will be imposed.

As is the case under current law, under Prop. 19, a grandparent-to-grandchild transfer receives the exemption only if the parents are deceased.

Your clients are likely to have many questions regarding the implementation of the new law, so C.A.R.’s Legal Team has prepared extensive Prop 19 FAQs to address some of those questions related to intergenerational transfers.

More About Prop. 19

The second part of Proposition 19 pertains to a homeowner who is 55 years of age or older, severely disabled or whose home has been substantially damaged by wildfire or natural disaster. They may transfer the taxable value of their primary residence to:

•    A replacement primary residence
•    Anywhere in the state
•    Regardless of the value of the replacement primary residence (with adjustments if “greater” in value)
•    Within two years of the sale
•    Up to three times (but without limitation for those whose houses were destroyed by fire)

Proposition 19 will supersede the old rules which limited this exemption to the sale and purchase of a principal residence within the same county (Proposition 60) or between certain counties (Proposition 90) — but only if the replacement property was of “equal or lesser value” and only one time.

Prop 19 tax portability (the ability to move your tax base) applies to any sale or purchase on or after April 1, 2021.

However, if an agent has a client who wishes to obtain the tax benefits of Proposition 19 for a transaction that closes prior to April 1, 2021, whether it is buying or selling a property, the client should be encouraged to seek the advice of a qualified California real estate attorney or tax advisor.

View C.A.R. Legal FAQs on Tax Portability here.