California Property Taxes, Tax Relief Programs and Proposition 19

Dated: March 14 2024

Views: 81

We had a surprise conversation with a friend recently who was lamenting she was stuck in her house because her property taxes were so low and if she moved they would go up quite a bit. We mentioned Proposition 19 and she thought it was only good for 4 counties and she didn’t want to move away from her family and friends. But Prop 19 that passed in November of 2020 changed it to a state level provision that was good for every county in California. It is aimed at homeowners who are 55 and older, presumably having owned their home longer and whose assessed value is considerably lower than a current full assessed value if the property changes hands. Keep reading for a more indepth dive into property taxes and some more options for tax relief.

 

Property taxes are a significant source of revenue for local governments and are used to fund essential services such as schools, police and fire departments, and infrastructure projects. In California, property taxes are calculated based on the assessed value of the property and the tax rate, which is typically around 1% of the property's value. Property taxes are subject to limitations under Proposition 13, which was passed by voters in 1978. Under Proposition 13, property taxes can increase by no more than 2% per year, regardless of changes in the property's value. This means that if you have owned your property for a long time, your property taxes may be significantly lower than if you were to purchase a similar property today. When you purchase a property, it is typically reassessed at the purchase price, which can result in a significant increase in property taxes. However, there are some exceptions to this rule, such as transfers between parents and children and transfers between spouses.

 

California offers several property tax relief programs for qualifying homeowners, including the Homeowners' Exemption, which reduces the taxable value of your property by $7,000. The Senior Citizens' Exemption, a less well-known program, provides additional tax relief for homeowners over the age of 65. The State Controller’s Property Tax Postponement Program allows homeowners who are seniors, are blind, or have a disability to defer current-year property taxes on their principal residence if they meet certain criteria, including at least 40% home equity and an annual household income of $51,762 or less (among other requirements). The deferment of property taxes is secured by a lien against the property which must eventually be repaid.   

 

Proposition 19 is a ballot measure passed in the November 2020 election that made significant changes to property tax rules in the state. It allows eligible homeowners who are over 55 years old to transfer their primary residence's property tax base value to a replacement residence of equal or lesser value within any county in the state. This provision is aimed at helping homeowners who want to downsize or relocate to avoid significant property tax increases. There are exceptions if the replacement residence is of higher value than the departing property, or if the homeowner is under 55 and severely disabled or has been a victim of a wildfire or other natural disaster.

 

Proposition 19 also changed the rules regarding inherited property. Under the new law, children who inherit a primary residence from their parents or grandparents can only maintain the property tax base value if they use the property as their primary residence and its fair market value does not exceed $1 million above the original tax-assessed value. This provision is intended to close what proponents saw as a loophole that allowed inherited properties to be passed down without reassessment.

Property taxes are an important consideration for California property owners and it's important to understand how they are calculated, how Proposition 13 limits tax increases, and how to take advantage of Proposition 19 tax transfers. We are here to answer any preliminary questions you may have, but for more in-depth information, it’s best to consult with a tax professional or financial advisor.

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Hutchens Hamalian Properties Group

Email: ash@hutchenshamalian.comHutchens Hamalian Properties Group is one of Dudum Real Estate's top Lamorinda teams. The Lafayette-based partnership focuses on real estate services in central Contra C....

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