Understanding Proposition 19: What Santa Cruz Homeowners Need to Know
As local realtors serving Santa Cruz County, we often hear from homeowners and families trying to understand how California’s Proposition 19 impacts property taxes, inheritances, and base year value transfers. Prop 19 made major changes to how property tax reassessment exclusions work, especially for parents passing property to children and for homeowners over 55 moving within California.
This article provides a summary of key points from attorney Shelli Strahle’s presentation at our recent Prop 19 seminar.
What Proposition 19 Changed
Before Prop 19, Propositions 58 and 193 allowed parents (and in some cases grandparents) to transfer a home and up to $1 million in other property to their children without triggering a reassessment of property taxes. That meant kids could inherit a family home and keep their parents’ low tax base even if they didn’t live there.
As of February 16, 2021, that’s no longer the case. Prop 19 now limits the parent-child and grandparent-grandchild exclusion to the family home or family farm, and only if the child (or grandchild) makes it their primary residence within one year of the transfer. Any other inherited property such as rentals, vacation homes, or commercial buildings is now subject to reassessment at market value.
What Counts as a Primary Residence or Family Farm
A primary residence is a property eligible for the homeowner’s or disabled veteran’s exemption. A family farm includes land used for cultivation, grazing, or agricultural production, even for crops like hemp or biofuels. Accessory Dwelling Units (ADUs) on a property are considered part of the primary residence.
Transferring Your Property Tax Base for Homeowners 55 and Older
Starting April 1, 2021, Prop 19 allows homeowners who are 55 or older, severely disabled, or victims of wildfire or natural disaster to transfer their existing property tax base to a new home anywhere in California. This can be done up to three times in a lifetime, unlimited for disaster victims. You can move your tax base to a more expensive home, but the difference in market value will be added to your new assessment. You must sell your original home and purchase or build your new primary residence within two years.
Example: If your home has an assessed value of $525,000 but sells for $1,300,000, and you buy a new home for $1,500,000, your new taxable value becomes $725,000 ($525,000 + $200,000 difference).
What About Joint Tenancy or Trusts
Be careful with joint tenancy, as adding someone to your title can create reassessment issues when one owner passes away. Holding property in a living trust is still highly recommended to avoid probate delays and costs. Probate fees can start at 4% of your estate’s value, and reassessment can occur during the process, leading to a large supplemental tax bill.
Key Takeaways for Santa Cruz Homeowners
Prop 19 limits property tax benefits for inherited properties unless the child lives there. Homeowners 55 and older, those with disabilities, or wildfire victims can transfer their tax base statewide. Trusts remain a crucial estate planning tool. Always consult with a qualified estate planning attorney or county assessor for personalized advice.
Local Insight: Why This Matters in Santa Cruz
With rising home values along the Central Coast, understanding Prop 19 can mean the difference between keeping your family’s low tax base and facing a major tax increase. Whether you’re planning to downsize in Capitola, relocate within Santa Cruz, or pass a family property to your children, knowing how these laws work helps protect your investment.
Have Questions About How Prop 19 Affects You?
At EF Homes, we don’t just help you buy and sell. Working with local attorneys, we’re here to guide you through important real estate changes that impact your family’s financial future. Reach out to discuss how Prop 19 could affect your next move or your estate plan.
Disclaimer
You should not assume that any of the material here serves as a substitute for getting personal legal advice. If you have legal questions or you need legal help, please contact an attorney. Issues relating to real property assessments are decided on a case-by-case basis and so all assessment questions should be directed to the county assessor for definitive answers.