Went into effect on April 1, 2021
Homeowners who are 55 or over, severely disabled, or whose homes were destroyed by wildfire or natural disaster, may transfer the taxable value of their primary residence to a replacement primary residence…
- Anywhere in California
- Regardless of the value of the replacement primary residence. Although, if the replacement primary residence is greater in value, there is an upward adjustment in the tax basis.
- Within two years of the sale of the original primary residence.
- Up to three times. Houses that were destroyed by wildfire or natural disaster have no limit on the number of times you can transfer your tax base.
Calculating the Tax Basis of the New Property under Prop 19
Rule 1: If the replacement property is of equal or lesser value to the original primary residence(OPR), then the taxable value of the replacement property remains the same as that of the OPR.
Rule 2: If the replacement property is of greater value then the taxable value of the replacement property will be adjusted by adding the difference in the sales price (technically, the “full cash value”) to the taxable value of the OPR.
Here is a sample calculation of Rule 2.
| Original primary residence (OPR) taxable value | $400,000 |
| OPR sold for | $900,000 |
| Replacement primary residence (RPP) purchase | $1,000,000 |
| Difference between sale price of OPR and purchase price of RPP | $100,000 |
| New Taxable value of RPP is $400,000 plus $100,000 | $500,000 |
New Rules on Transfer of Property to Children and Grandchildren
A property is only exempt from reassessment if:
- The property “continues as the family home of the transferee,” or if it’s a family farm.
- The property is being transferred from a parent to child or grandparent to grandchild.
- The transfer is completed within one year.
General Rule:
If a child or grandchild qualifies by continuing to use the home as a primary residence, then the original Taxable Value (TV) of the property for that child/grandchild will remain the same as the TV to the parent, unless the following applies:
Exception:
If the assessed value of the family home is more than $1M over the original TV, then the new TV will increase.
For example:
Assume the assessed value of the family home is $2M and the original TV is $500K. Because $2M is more than $1M above the original TV, the new TV will increase.
If so, the new TV will be the new assessed value minus $1M. In this case, $2M minus $1M equals $1M, and that is the new TV.
For more info, go to https://www.caprop19.org/
The information contained herein is intended to provide general information and is not intended as a substitute for individual legal advice. Specific examples used are only general examples, and the actual amount of property taxes owed for any person will depend on the specific situation of the individual and a wide variety of other factors. Therefore, all persons are directed to seek the advice of an attorney regarding their specific tax and legal situation.