A BID TO REPEAL PROPOSITION 19 AND WHAT THIS COULD MEAN FOR YOU

A third attempt to repeal Prop 19 is hoping to make it to the ballot box in 2026. Understanding the implications of such a repeal is important in order for you to make an informed decision about how you would like to vote.

What Did Prop 19 Do?

The Good

Proposition 19 passed in November 2020 after being marketed as a tax relief measure for wildfire victims, seniors, and disabled people.

The measure allowed more vulnerable groups to transfer their low property tax to a new home within California.

It increased funding for schools, fire protection, and local governments from reassessed inherited properties.

The Bad & the Ugly

Inheriting property became much more expensive, as it encouraged housing turnover by reassessing the home’s value at full market value, with limited protections even for families that planned to keep the home as a primary residence.

While the proposition was intended to help close a “rich people loophole,” the reality is that those affected were mainly middle-class families and small rental owners due to the huge tax increases.

While the tax transfers for vulnerable groups sounded great in theory, the truth is most of the beneficiaries of this proposition were the wealthy, because most disabled middle-class homeowners do not have the equity to purchase another home in order to transfer their low property tax to a new home.

Example (Parent to Child Transfer):

Parent purchased home for $300,000, which is now worth $1.5 million.

Result 1: If the child moves in and uses it as their primary residence, the exclusion covers the tax base plus $1 million ($300,000 + $1,000,000 = $1,300,000). This means there is an excess of $200,000, which is added to the tax base, making the new taxable amount $500,000.

Result 2: If the child rents out the home, the home is reassessed at the current fair market value of $1.5 million ($15,000–$20,000 annually, up from $3,000–$4,000 annually, resulting in an increase of over $12,000).

What Will Repealing Prop 19 Do?

• Allow transfer of inherited property passed down to children or grandchildren without a property tax reassessment
• Reduce funding for local governments
• Eliminate the funding source for Prop 19’s California Fire Response Fund
• • Reduce funding for schools

Ultimately, repealing Prop 19 would restore protections that allowed families to pass down homes to their children without major tax increases. As the issue potentially returns to the ballot in November, it is important to weigh the benefits and the consequences to determine how it aligns with your values and the financial future of your loved ones.

Categorized in: Estate Planning, Proposition

This post was written by Peter H