Proposition 19. If you own a home in the state of California, you’ve heard about this Proposition and like a lot of people, you’ve probably have a lot of questions out there.
In the video above, I covered Proposition 13, then Proposition 60, Proposition 90,and how all of that changes with Proposition 19 and then I went over some examples so that it makes it a little bit more clear.
1. Proposition 13
Proposition 13 was known as “Peoples Initiative to Limit Property Taxation”, and limit it, it did. It was voted in by the California voters in 1978 and what it did, at that time, it moved the property taxes back to what the levels they were in 1975, and then it limited the property taxes to 1% of the assessed value.
Typically right now, it’s 1% of your purchase price. And then it also limited the increases so it could only go up by a maximum of 2% per year. To be clear about this, Proposition 13 did not change. It is still there, it is in no way affected at all by Proposition 19.
2. Proposition 60
So, Proposition 13 was brought on to help senior people that were on a fixed income or anybody basically that was on a fixed income and it kept the property taxes from going up. But what it did was that it limited, it decreased their ability to move because if somebody’s on their home for 10 years, and you know how prices our going on in California, and then the new home, if they wanted to sell that, the new home would be assessed in the current purchase price.
So, what that did, was a lot of seniors who were empty nesters were stuck living in their big homes because they couldn’t move because they couldn’t afford what the new property taxes would be.
The good thing was it allowed senior citizens 55 and up. It allowed people that were 55 and over to sell their primary residence and transfer that low tax basis that they had with Proposition 13 to their new home.
Now, there were a couple of stipulations. The new home had to have been of equal or lessor value. It could not go up in value.
They had that option they could do it one time. If you’re over 55 and you did it once, let’s say you turned 55, you did it once, you could no longer take advantage of that. You had 2 years to find that replacement home and to transfer that tax basis.
But it had to be in the same county.
3. Proposition 90
It allows for the transfer of tax basis to other counties within California as long as the voters in that county also approved it. Currently, there are only 10 counties, that you could transfer your tax basis too. So with all of that in mind, the voters then voted last November 2020, the Proposition 19.
And that will have an effect on the sale of your primary residence and it will also have an effect of the transfer of the property by gift or inheritance.
I went over what the current law says and then how it’s changed by the Proposition 19. The current law allows you to sell your primary residence, you can transfer that tax basis within 2 years in the same county or use Prop. 90 and go to one of those 10 counties.
It had to be of equal of lessor value and you could only do it one time. There was an exception if you did it when you were 55 and then you did become disabled then you were able to do it the second time.
Now that law still goes through until March 31st of 2021. On April 1st of 2021, Proposition 19 kicks in and the difference is, now, it’s still the principal residence, it can still be transferred within 2 years, and the difference is, you can transfer your current tax basis anywhere you want to move in the state of California.
Now here’s the big thing, it is for any value.
For much more detailed explanation, watch the video above.