S.E. Williams | Executive Editor
With the passage of Proposition 19 in November 2020, California voters approved the portability of property tax base value allowing homeowners over age 55 a greater opportunity to move to a replacement home and be able to keep their prior home’s lower tax bill.
Property tax base-year transfers become effective on or after April 1, 2021.
According to the California Board of Equalization (BOE), under the proposition an owner of a primary residence who is over 55 years of age, severely disabled, or a victim of a wildfire or natural disaster may transfer the base year value of their primary residence to a replacement primary residence located anywhere in California that is purchased or newly constructed as that person’s principal residence within two years of the sale of the original primary residence, regardless of the value of the replacement residence.
Also, according to the BOE, “If the replacement residence is of equal or lesser value than the original primary residence, the taxable value of the original primary residence may be transferred to the replacement residence.”
Taxable value is defined as the base year value, plus any adjustment which provides that real property is reassessed when purchased, newly constructed, or a change in ownership has occurred. In essence, Taxable value means the factored base year value.
If on the other hand, the replacement residence is of greater value than the original primary residence, partial relief is available. The new base year value of the new residence is the sum of the factored base year value of the original primary residence plus the difference between the two.
A Homeowner, who is over age 55, sells a primary residence on June 28, 2021 for a full cash value of $700,000. At the time of sale, the single-family residence has a factored base year value of $225,738.
On July 22, 2021, the homeowner buys another home for a full cash value of $800,000. Since the full cash value of the replacement primary residence exceeds the full cash value of the original primary residence, the difference in full cash values must be calculated and added to the transferred factored base year value:
$800,000 – $700,000 = $100,000 (difference in full cash values)
$225,738 (factored base year value )+ $100,000 = $325,738.
Thus, the new base year value of newly purchased primary residence is $325,738.
For assistance or questions, please contact the BOE Property Tax Department by phone at 916-274-3350 or by email at www.cdtfa.ca.gov/email/ .
Approval of aspects of Proposition 19 struck a blow to the state’s staunchest supporters of the 1978 property tax measure, Proposition 13, (People’s Initiative to Limit Property Taxation). The Howard Jarvis Taxpayers Association is a nonprofit lobbying and policy organization that advocates for Proposition 13 and against raising taxes in California. The group opposed the measure because it repealed Proposition 58 (1986) and Proposition 193 (1996).
With the passage of Proposition 19, a property tax’s base value will be reassessed to market value when it is transferred from parents to children, and sometimes from grandparents to grandchildren. The only exception is if the person to whom the property is transferred, moves in.
Proposition 19 is effective for parent-child transfers that occur after Feb. 15, 2021. The proposition is not retroactive so those who inherited property before this date will not be impacted.
HJTA advised property owners who are considering making any changes to the title of their property, to first consult a trusted attorney, accountant or estate planning professional. “There may be tax consequences, beyond property taxes, such as capital gains or gift tax liability.”