Proposition 19 Could Mean Big Changes For Property Taxes
A yes vote for Prop 19 will aid seniors, the disabled, and those affected by disasters.
Proposition 19 will have some pretty big effects on property taxes if it passes, which is why it’s important for California voters to understand what it’s all about. The new proposition features two vital key elements. Firstly, a tax hike that will affect those who inherit property, but also a tax break aimed at benefiting seniors and the disabled, as well as victims of natural disasters such as wildfires.
Back in 1978, California passed Proposition 13, which capped property taxes at 1% of the sale price of a home and prevented them from being increased by more than 2% per year. This 42-year old law is currently benefiting a whole lot of people who own property in the Golden State, particularly those who have owned property for a while.
Why? Well, since property prices now are significantly higher than they have been in the past, if the price of your home skyrockets, your property taxes are capped at a maximum of a 2% tax rise annually.
That all sounds well and good, but there is a side to it that isn’t all rainbows and butterflies (and cheaper taxes). Firstly, it stops seniors or those who have owned their property for a long time from wanting to move out and paying significantly higher taxes on a new home. As of right now, the law enables those over the age of 55, those with a disability, or those who have been affected by a disaster to move their lower tax base over when they buy a new house, but with a couple of caveats:
- The new home must not be more expensive than the old one
- The new home must be within a select group of counties
- It can only be used once in a person’s lifetime
Enter Proposition 19, which, if passed, will change these rules to better benefits affected groups. Under the new law:
- Lower tax bases could be moved to more expensive homes and higher taxes paid only on the difference
- Moves would be permitted anywhere in the state of California
- It could be used up to three times in a person’s lifetime
Seems like a sweet deal, but once again, there’s more to it. Proposition 19 would also involve a tax hike on any property gained through inheritance. Currently, in the event of a death, property left to family members can retain the same lower tax base. But, you guessed it, Proposition 19 would mean that this lower tax base on the inherited property would only be retainable if the home is used as a primary residence.
So, where would all this gained tax money go in the event Proposition 19 passes?
Well, some would go to the local government, but the majority would be used for increased fire protection and funding resources for fighting wildfires.
Just like with most things these days, there’s pros and cons to voting yes for California Proposition 19. How will you vote?
* Dana Olmes or Jeff Biebuyck and its affiliates, brokers or agents do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.