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Property Tax Planning For the Real Estate Investor After California Proposition 19

Understanding California's Proposition 19

California's Proposition 19, passed by voters on November 3, 2020, significantly changed the state's property tax laws. This constitutional amendment primarily aims to increase property tax revenue from inherited properties to provide tax benefits for specific groups of homeowners and to fund wildfire response.

The law introduced two major changes:

  1. Restricting the Parent-Child Exclusion: Proposition 19 severely limits the ability of parents to transfer their primary residence to their children while keeping the low property tax base. Under the new law, a child must use the inherited home as their own principal residence and the home's value must not exceed the original tax base plus $1 million. If the value is higher, the property will be reassessed, leading to a significant increase in property taxes. This change effectively eliminates the tax-free transfer of vacation homes, rental properties, and second homes to children.

  2. Expanding Property Tax Portability for Seniors: For homeowners who are age 55 or older, disabled, or victims of a natural disaster, Proposition 19 offers a major new benefit. It allows these homeowners to transfer their low property tax base from their current home to a replacement home anywhere in California. This can be done up to three times (or once for disaster victims), allowing them to move to a more expensive home without a massive property tax increase. This "portability" provision incentivizes seniors to sell their larger, older homes and move, potentially increasing housing inventory.

 

 

Sacramento Estate Planning, Tax Planning and Business Attorney.

I’m John Goralka, a Sacramento Estate Planning, Tax Planning and Business Attorney at the Goralka Law Firm, P.C. If you have an estate, tax or business situation needing legal help, contact our team for experienced and friendly advice. You can contact us at 916-440-8036. Alternatively, you can use our convenient online contact form here on our website. We listen, and you can have your questions answered, your case evaluated, and explore your options for getting the legal help you need. 

There are almost 200,000 attorneys in the state of California, and fewer than 100 of those attorneys are State Bar Specialists in Estate Planning, Trusts and Probate and State Bar Specialists in Taxation.  I am one of the few attorneys with both critical specializations.  I passed the California CPA examination and am a former income tax auditor and hearing officer.  I am also recognized as a top attorney in the United States by US News and World Reports and by Best Lawyers and hold an AV rating from Martindale which is the premiere rating organization for attorneys.  The AV rating is the highest possible rating for legal experience and for legal ethics.