Californians narrowly passed Proposition 19 last month which is expected to significantly change property tax rules for older homeowners selling their houses as well as family members inheriting homes and rental properties.
So How does Proposition 19 change the rules on tax basis portability?
Prop 19 allows a homeowner who is 55 years of age or older, severely disabled or whose home has been substantially damaged by wildfire or natural disaster to transfer the taxable value of their primary residence to
a) a replacement primary residence anywhere in the state,
b) regardless of the value of the replacement primary residence (but with adjustments if replacement has a greater value),
c) within two years of the sale and
d) up to three times (or as often as needed for those whose houses were destroyed by fire).
The prior rule limited this exemption to a one-time transfer within the same county (Prop 60) or between certain counties (Prop 90) and only if the replacement property was of "equal or lesser value."
When does the tax basis portability portion of Prop 19 take effect?
April 1, 2021
How does Prop 19 affect the rules on intergenerational transfers to children or grandchildren?
It limits the exemption to those properties where the primary residence continues to be used as a family home by the child or grandchild transferee. If so, the taxable value will remain the same, subject to some upward adjustments if the property value, at the time of transfer, is more than $1M over the original tax basis.
When do these new rules on intergenerational transfers apply?
February 16, 2021.
Here is a link to the Proposed Law for your reading pleasure:
Text of Proposed Law
Please free to reach out with any questions, I can send you a quick guide.
Any Tax or Legal questions should be directed to the apppropriate professional, since i am not qualified to offer such advice, but time is of the essence especially if the intergenerational tranfer rules may affect your home!