Proposition or Prop 19 bill passed with more than 51.1 percent of the vote in California. The Property Transfer Tax and County Amendment predicts sweeping changes in taxes evaluated on personal residences. Precisely, the designed measure allows property owners in Marin County, California to change their residence while avoiding taxes on family properties.  

Effective from April 1, 2021, the measure for property tax has two significant parts. The first part enables eligible property owners who are disabled, 55 years old, or lost their property in a natural calamity to transfer the tax base to a new residence up to 3 times in California.  

Previously, the scenarios under Proposition 60&90 were different. Homeowners were allowed to use tax base transfer only once in their lifetime when buying a replacement property in some Californian counties. 

Proposition 19, however, has superseded the previous laws. The other part of this Proposition presents the requirements eligible Marin County and California homeowners need to follow to retain tax basis in inherited transfers. 

 Let’s delve into the details to help you understand the critical things in property tax law and its impacts. 

Proposition 19 and Tax Basis Portability- What is Different Now

This is good news for homeowners who are 55 years or older, have homes with substantial damages (due to natural disaster), or have a physical disability. The new property tax law allows homeowners to transfer or move their home’s taxable value to a replacement property in the state. 

They can transfer the value regardless of the original value of the primary residence. But if the replacement property has a high value, the homeowners can make some adjustments.  The eligible homeowners must transfer the tax within 24 months of the sale and make it up to 3 times.

As mentioned above, the prior tax law offered only one-time transfer within California (or some other counties).  Homeowners could opt for it if the replacement residence were of lesser or equal value. 

How Does Prop 19 Affect Marin County Homeowners?

While Prop 19 has significant benefits for inheritors to move tax base into a new residence, it subjects them to more limitations on the family properties.  Considering this, the new property tax law may have implications for not only inheritors and homeowners in Marin County but also for local governments. 

We say this because Prop 19 requires the State Controller of California to deposit more than 15 percent of the total income to the Revenue Protection and 70 percent to Fire Response Fund.

What Homeowners Can do If the Replacement Property is Costlier than the Sold Homes 

The new tax base has a formula that homeowners can apply if the replacement property is costlier than the old home.

[New home value –old home value] + [previous tax base] = [current tax base]

If your tax assessment is $300,000 on your house sale for $900,000 and you move to a property worth $1.2 million, your new tax base will be around $400,000. Your new property will still retain a tax base of $700,000. 

How Does Prop 19 impact Inheritors 

If you receive a family property from your parents or grandparents, it will have the same tax base until you use it as a personal residence.  However, you may have to make some more adjustments if your new property is more than $1 million compared to the original tax.  Note that family orchids and farms don’t have Prop 19’s restrictions. 

How Can Homeowners Get the Tax Portability Advantage if they Sell or Buy Now

The question doesn’t have any definitive answer.  However, it is possible that these tax benefits of Proposition 19 will apply to all those transactions in which the purchase or sale of family property occurs before April 1, 2021. The benefits will remain applicable if the subsequent purchase or sale takes place within 24 months. 

If you want to benefit from the new property law changes for your transaction that will close before April 1, 2021, seek the assistance of a competent attorney. Whether you want to buy or sell a property, only a qualified tax advisor or real estate attorney can assess your particular situation and guide you in the right direction. 

Summing Up

All in all, Prop 19 is a constitutional amendment that has imposed new limits on tax benefits related to inherited property in Marin County. Under this law, you (as a child) can keep the same tax base as your parents had if you use the property as a primary residence.  Seeking professional advice from a law attorney will help you apply the tax law and benefit from it.

Thus, the article explains the key features of Prop 19 related to selling and buying home in Marin to help you understand it. Contact your tax advisor for more information.

Additional Resources:

California Association of REALTORs Prop 19 Quick Guide

California State Board of Equalization on Prop 19

Marin County Assessor’s Office