Tax Base Transfer

Proposition 19 made it possible for qualifying homeowners to transfer their tax base, but the many limitations and rules that were largely ignored by voters when the bill passed can make it complicated and downright confusing to people who are eligible to preserve the low tax base, but may not know they are eligible or may not be aware of key restrictions.

Most people know of the benefit of property tax base transfer that is available under Prop 19 to Seniors 55 and older, but the Proposition also made this option available to the permanently and severely disabled and victims of wildfires or other natural disasters.

Interestingly enough, out of the over 400 applications received by the Santa Cruz County Assessor, only 2 of these were for disabled and 2 were for wildfire victims. This suggests that there are homeowners who are either disabled or were displaced by the CZU fire who may not be aware that they qualified for the transfer. In either case, it would merit a call to the Assessor to see if they are still eligible, and with a filing deadline of 3 years from the date the new home was purchased, that call should be made sooner rather than later.

The base transfer option allows the homeowner to transfer their primary home anywhere in California, and it allows them to transfer to a higher-value home as long as they are willing to add the difference to the assessed value of the home they are transferring from. Under the new rules, eligible homeowners can transfer their value up to 3 times (6 for married couples). As well, if at least one owner qualifies in a property with multiple owners, the tax benefits apply, and a primary residence can now include an Accessory Dwelling Unit.

A big downside which most voters didn’t fully realize when the bill passed was that under Prop 19, the parent/child exclusion became much more limited. Previously, under Prop 58, there was no limit on the exclusion for the property base from a parent’s primary residence and it also allowed up to $1 Million exemption per parent (so up to $2 Million) for any other real properties being inherited. Under the new rules, the exclusion has been wiped out entirely on all other inherited properties. They also imposed an adjusted $1,000,000 exclusion on the parent’s primary residence and made it necessary for a single heir wanting the exemption to move into the home within 1 year from the date of death. All of this has been great for the state’s tax coffers, but not so great for families inheriting property. 

The complexity of Prop 19 made it necessary for our local tax assessor’s office to hire additional staff to help homeowners and heirs figure out all the details, some of which the assessor is still in the process of figuring out themselves. For anyone who is eligible for a transfer under the new rules, it is a good idea to connect with a professional who knows what questions to ask, and who to ask…and as is often the case, the answers you get can make a big difference in your financial picture.