The most significant recent change to California property tax law is Proposition 19, approved by voters in November 2020 and implemented in phases beginning in February and April 2021. It was this law that enabled my family to relocate from Burbank to Santa Clarita and take our Burbank property tax base with us. This resulted in savings over $9,000 a year!
Proposition 19 had two main impacts:
1. Intergenerational transfers
- Before Prop 19: Parents could transfer their primary residence and up to $1 million of other real estate to children (or grandchildren in some cases) without reassessment. This included rental properties.
- After Prop 19: For the property tax exclusion to apply, the transferred property must be the transferor’s primary residence and become the child’s or grandchild’s primary residence within one year. A value limit applies: if the market value exceeds the factored base year value plus $1 million (adjusted for inflation), the difference is added to the taxable value. The exclusion for inherited properties other than the primary residence was eliminated. That means a rental or vacation property would be reassessed at its current fair market value at the time of transfer.
2. Base year value transfers (for seniors, disabled persons, and disaster victims)
- Before Prop 19: Homeowners over 55, those with severe disabilities, or disaster victims could transfer their primary residence’s taxable value to a replacement home of equal or lesser value, usually within the same county.
- After Prop 19: Homeowners over 55, severely disabled individuals, or victims of a wildfire or natural disaster can transfer the taxable value of their primary residence to a replacement primary residence anywhere in California, up to three times (or once per disaster). The replacement residence can be of any value; if it’s more expensive, the difference is added to the transferred base year value. As an example, I sell my Burbank primary residence for $1,000,000, which has a taxable base of $500,000 (I purchased it a few decades ago). I buy a new personal residence in Palos Verdes for $2,000,000. My property tax base for the Palos Verdes residence will be the $500,000 Burbank base, plus $1,000,000 ($2,000,000 purchase price of the Palos Verdes home minus the zzzzzzz41,000,000 selling price of the Burbank home) – or, $1,500,000 new taxable value.
Additional updates
- Homestead Exemption: Effective January 1, 2025, the homestead exemption increased to a minimum of $361,113 and a maximum of $722,151, providing increased protection in bankruptcy.
- Small Estate Transfers: As of April 1, 2025, primary residences valued at $750,000 or less may be transferred without full probate. You can read more about that procedure here.
- Disabled Veterans Exemption: Starting January 1, 2025, a full property tax exemption is available for 100% disabled California veterans and some surviving spouses.
- SALT Deduction: For tax years 2025-2029, the federal state and local tax (SALT) deduction cap is raised to $40,000 for taxpayers with incomes under the applicable AGI maximum cap, allowing some California homeowners to deduct more property taxes (and state income taxes) federally. California never conformed to the SALT limitation. See the separate Blog on the new SALT deduction after OBBBA.