How Changes to California’s Property Tax System Could Affect Reassessments

Changes are coming to Prop. 13, California’s paramount property tax limitation measure that caps taxable property value increases, and homeowners who are over the age of 55, disabled, or victims of a natural disaster stand to benefit the most. Transfers between family members will also be affected.

On Nov. 3, 2020, California voters approved Prop. 19, the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Prop. 19 is a constitutional amendment to Prop. 13 that expands the portability of a property owner’s tax base and limits benefits for individuals who inherit property from their parents or grandparents.

“Prop. 19 introduces some very big changes to the California property tax system, and we are working diligently to implement these changes quickly,” said Peter Aldana, Riverside County Assessor-County Clerk-Recorder. “There are still a lot of questions related to the language of this amendment, and my fellow assessors and I expect these to be ironed out by the Board of Equalization and state Legislature in the coming months. For now, we’re working to provide the public with the best information we have.”

Under current law, children and grandchildren may inherit their parents’ or grandparents’ property tax assessment. This applies to a primary residence of any value and up to $1 million in additional property. Beginning Feb. 16, 2021, the individual inheriting a primary residence from their parents or grandparents will have to occupy the property to receive their parents’ or grandparents’ assessed value, and such transfers will be subject to limitations. The exclusion for additional property will be eliminated.

Beginning April 1, 2021, homeowners who are over the age of 55, disabled, or victims of a wildfire or natural disaster will be able to transfer the assessed value of their primary home to a newly purchased or newly constructed replacement anywhere in the state up to three times. Current law allows only one such transfer and limits it to replacements within the same county or to a participating county.

The hallmark provisions of Prop. 13 that limit rising taxable property values remains unchanged. Property owners that remain in their home and are currently protected by Prop. 13 will remain unaffected.

Changes introduced by Prop. 19 will, however, affect how certain homeowners decide to transfer their Prop. 13 protections, either to a new property or by transferring them to a child or grandchild.

Taxpayers can seek more information related to Prop. 19 on the Riverside County Assessor-County Clerk-Recorder’s website by clicking here.

“Prop. 19 may affect retirement plans and family estate planning,” Aldana said. “Although my staff and I stand ready to provide the best information to the public as possible, we encourage taxpayers to seek advice from legal and financial professionals with questions related to their specific plans.”

Image Sources

  • Property tax: Shutterstock