California passed Prop. 19. Here’s what that means for Bay Area real estate.
Prop. 19, which passed with a 51.1% majority vote as of Monday, has two distinct parts, the first of which allows homeowners who are 55 or older or those who lost their home in a natural disaster to transfer their tax assessment to a new home. The tax value of the new home will be added to the current tax assessment if the new home is more expensive. A transfer like this can be done three times and homeowners have two years to sell their current home and buy a new one.
Legislators hope this measure will increase home sales by calming the fears of those who want to move but are concerned about rising tax bills.
The second part of the measure eliminates the ability for a home to pass from a parent to a child or grandchild without reassessing the home value, unless it’s the child’s or grandchild’s primary residence. If the child or grandchild doesn’t live in the inherited home and instead chooses to rent it out, the tax value can be reassessed.
Currently, family members can transfer a home and the property value won’t be reassessed. They can also transfer other rental or commercial properties and exempt up to $1 million of the assessed value. This passage eliminates the aforementioned loopholes.
The enactment of Prop. 19 is likely to cause real estate owners to assess their future plans and decide whether to buy, sell or transfer ownership of their homes before the measure takes effect. But while real estate transactions await, there is still some clarification needed from the California Board of Equalization.
The new changes to property transfers among family are set to begin on Feb. 16, 2021. Property tax transfers for the elderly, disabled and natural disaster victims will apply starting April 1, 2021, but it’s unclear if current homeowners looking to take advantage of the measure will have to wait until then to do so. As mortgage rates are historically low, some homeowners may want to complete one of the transactions in advance of those deadlines, even if the other transaction is made after April 1.
Proposition results won’t be certified in the state until Dec. 11, after which the Board of Equalization could provide further guidance.
New property tax revenue generated from Prop. 19 will help establish a California Fire Response Fund, with 20% of funds allocated to the Department of Forestry and Fire Protection and 80% of funds going to local special districts for fire suppression.
This content was originally published here.