An Overview of Prop 19

Understanding Prop 19

What is Prop 19?

Prop 19 allows a homeowner who is 55 years of age or older, severely disabled or whose home has been substantially damaged by wildfire or natural disaster to transfer the taxable value of their primary residence to:

• a replacement primary residence anywhere in the state

• regardless of the value of the replacement primary residence (but with adjustments if replacement has a greater value)

• within two years of the sale and up to three times (or as often as needed for those whose houses were destroyed by fire).

When does the tax basis portability portion of Prop 19 take effect?

April 1, 2021

If the replacement property is of greater value, how is the new taxable value calculated?

The new taxable value is calculated by adding the difference between the full cash value of the replacement property and the original property to the original taxable value.

Can a replacement property be purchased prior to the original primary residence being sold?

Yes, under Prop 60 this is how the current rule works. Prop 19 uses similar language.

How does Prop 19 affect the rules on intergenerational transfers to children or grandchildren?

Prop 19 limits the exemption to those properties where the primary residence continues to be used as a family home by the child or grandchild transferee. Properties used for other purposes (i.e. investment properties) can no longer use the special rules. For primary residences, the taxable value will remain the same; subject to some upward adjustments if the property value, at the time of transfer, is more than $1M over the original tax basis.

When do these new rules on intergenerational transfers apply?

February 16, 2021.

What did the ballot measure do with changes in revenue?

Prop 19 allocates net state revenues and savings, if any, to wildfire response and for reimbursing local governments. However, the COVID-19 pandemic has created significant uncertainty for the state budget, the legislative analyst believes that the vast majority of the wildfire funding will not start flowing until 2025 at the earliest.