As real estate professionals, we are often asked about Proposition 19 in our day-to-day business dealings. Proposition 19 was put on the ballot and passed by California voters in November of 2020. Certain elements went into effect on Feb 16, 2021 and April 1, 2021. To clarify, the California State Board of Equalization (BOE) is responsible for overseeing and ensuring statewide uniformity in the assessment of properties by the 58 County Assessors, including Los Angeles County. Therefore, our LA County Assessor acts on directives initiated by the BOE.
Following are the fundamental elements of Proposition 19 as provided by the Los Angeles County Assessor (https://assessor.lacounty.gov/homeowners/proposition-19):
Intergenerational Transfer Exclusion
Parent to Child transfers and Grandparent to Grandchild Transfers. Prop. 58 & Prop.193, previously allowed a parent(s), and in certain cases grandparent(s), to transfer their existing property assessments of a principal residence of any value without triggering a reassessment, which is generally required upon a change in ownership – even if the property is used as rental property by the child. Prop. 58 & Prop.193 also allowed for the inheritance of property assessments for up to $1 million in additional real estate, whether residential or commercial. Under the new Proposition 19 (effective Feb. 16, 2021), parent(s) and grandparent(s) can transfer their property along with its Proposition 13 base year value to their children or grandchildren if the following conditions are met:
- The property must be the principal residence of the parent(s) or grandparent(s).
- The property must become the principal residence of the child or grandchild within one year, and all applicants must have a valid Homeowners’ Exemption (HOX) filed within 1 year of the transfer in order to qualify for this exclusion.
- Only the principal residence of a parent(s) or grandparent(s) qualifies for a base year value transfer. Other property, residential or commercial, no longer qualify for this benefit.
Inherited rental properties and second homes, not used as primary residences, will be reassessed at current market value when transferred. Also, there is a limit to the value that can be excluded for a family home. 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.
Transfer of Assessment to a Replacement Property (55 and Older and Disabled)
Propositions 60/90 and 110 allowed persons over 55 or severely and permanently disabled persons to transfer the taxable value of their existing home to a new replacement home, so long as the market value of the new home is equal to or less than the existing home’s market value and located in Los Angeles County or one of nine other participating counties in California. Proposition 19 (effective April 1, 2021) modified the previous provisions, and now allows eligible homeowners to transfer the taxable value of their existing primary residence to a new replacement primary residence. The replacement residence can be of any value (with some limitations), and anywhere within the state. The exclusion can be filed up to three times by a property owner over their lifetime.
Disaster Relief Tax Base Transfers
Prop. 50 provided that the base year value of property that is substantially damaged or destroyed by a disaster, as declared by the Governor may be transferred to comparable property within the same county. Prop. 171 allows the transfer of the base year value of a principal residence to a county that has adopted the ordinance. Prop. 19 allows homeowners to purchase a replacement home of greater value than their original home and transfer their tax base with an adjustment to account for the value difference in cases of homes destroyed by wildfires or other natural disasters.
With San Pedro and Rancho Palos Verdes consisting of so many multigenerational families, there is considerable financial incentive for local homeowners to utilize Proposition 19. We always encourage our readers to reach out to a real estate professional, the local County Assessor, or the BOE with any questions as it relates to your situation.
Mike Harper and Peter Hazdovac are co-owners of HH Coastal Real Estate, an independent local brokerage. For more info, visit www.hhcoastal.com.