Prop19

Proposition 19 — California Property Tax Transfer Rules ## Background California's Proposition 13 (1978) limits property tax assessments to the purchase price (base year value) and allows increases of no more than 2% per year. This creates enormous built-in property tax savings for long-term owners — a home purchased in 1990 for $400,000 may have an assessed value well below its current market value of $2M+, creating a tax basis that is highly valuable. Proposition 19 (passed November 2020, effective February 16, 2021 for parent-child transfers) fundamentally changed how these tax benefits are inherited and transferred. --- ## What Proposition 19 Changed ### Parent-Child Transfers (Before Prop 19) Before Prop 19 (under former Propositions 58 and 193), a parent could transfer ANY real property to a child, and the child could keep the parent's low assessed value regardless of: - Whether the child occupied the property - The value of the property - How many properties were transferred This allowed families to pass multiple rental properties, vacation homes, and commercial properties to children with the parent's low Prop 13 basis intact. ### Parent-Child Transfers (Under Prop 19) Prop 19 dramatically restricted the parent-child exclusion: Primary residence only: The low assessed value can only be transferred if the property is the transferee child's primary residence within 1 year of transfer. Value cap: Even for a qualifying primary residence transfer, if the property's fair market value exceeds the parent's assessed value by more than $1,000,000, the excess above that threshold is added to the assessed value. Example: Parent's home has assessed value of $500,000 and current FMV of $2.5M. Under Prop 19: - Base value passed = $500,000 - Add $1M…