California Proposition 19 represents one of the most significant changes to property tax rules in decades. Passed by voters and implemented beginning in 2021, Proposition 19 reshaped how homeowners can transfer their property tax base when moving and how property taxes are reassessed when homes are transferred to children or grandchildren.

For many homeowners, especially longtime owners in high-value coastal communities like Palos Verdes, these rules can create meaningful tax savings or, if misunderstood, unexpected tax consequences.

Understanding Proposition 19 is essential for homeowners considering a move, estate planning, or transferring property to family members.

Why Proposition 19 Was Created

Before Proposition 19, California homeowners were often “locked in” to their homes because moving meant losing their low property tax base established decades earlier under Proposition 13. Even homeowners who wanted to downsize, relocate closer to family, or move for health reasons faced dramatically higher property taxes if they purchased a new home.

At the same time, California’s housing supply was increasingly constrained. Policymakers believed that allowing older homeowners greater flexibility to move could help free up housing inventory while preserving property tax protections.

Proposition 19 was designed to:

• Allow certain homeowners to move without losing their property tax base

• Expand portability statewide

• Adjust outdated rules that limited transfers

• Modify how inherited properties are reassessed

Who Qualifies for Property Tax Portability Under Proposition 19

Under Proposition 19, the following homeowners may transfer the taxable value of their primary residence to a replacement primary residence:

• Homeowners who are 55 years of age or older

• Homeowners who are severely disabled

• Homeowners whose primary residence was destroyed by wildfire or natural disaster

If you qualify under one of these categories, Proposition 19 may allow you to preserve your existing property tax base when purchasing a new home.

Where Property Tax Can Be Transferred

One of the most important changes under Proposition 19 is statewide portability.

Previously, property tax transfers were limited to:

• Within the same county under Proposition 60

• Between counties only if the destination county opted in under Proposition 90

Only ten counties allowed intercounty transfers under the old rules.

Under Proposition 19:

• Property tax base transfers are allowed anywhere in California

• County participation is no longer required

• You may move from any county to any other county in the state

This change significantly expanded mobility for eligible homeowners.

How Many Times Can You Transfer Your Tax Base

Before Proposition 19, eligible homeowners could transfer their tax base one time only.

Under Proposition 19:

• Eligible homeowners may transfer their tax base up to three times

• There is no limit on the number of transfers for homeowners whose homes were destroyed by wildfire or natural disaster

This flexibility allows homeowners to make multiple life-stage moves without losing property tax protections.

Timing Rules You Must Follow

Timing is critical under Proposition 19.

To qualify for the tax base transfer:

• The replacement primary residence must be purchased or newly constructed within two years of the sale of the original primary residence

• The transaction must comply with the effective dates of Proposition 19, which apply on and after April 1, 2021

Because timing can affect eligibility, homeowners should plan carefully and consult appropriate professionals.

Can You Buy a More Expensive Home?

Yes. This is one of the most misunderstood but valuable features of Proposition 19.

Under prior law, tax base transfers were limited to replacement homes of equal or lesser value. Under Proposition 19:

• You may purchase a replacement primary residence of any value

• If the replacement property is more expensive, your tax base will be adjusted upward

This allows homeowners to move into a higher-value home while still preserving a portion of their original tax basis.

How the New Taxable Value Is Calculated

The calculation depends on whether the replacement home is of equal, lesser, or greater value than the original home.

If the Replacement Home Is Equal or Lesser in Value

If the replacement primary residence is equal to or less than the value of the original primary residence:

• The taxable value of the replacement home remains the same as the original taxable value

This is the most straightforward scenario.

If the Replacement Home Is More Expensive

If the replacement primary residence is more expensive:

• The taxable value is adjusted by adding the difference between the sale price of the original home and the purchase price of the replacement home to the original taxable value

Example:

• Original home taxable value: $400,000

• Original home sold for: $900,000

• Replacement home purchased for: $1,000,000

• Difference in value: $100,000

New taxable value:
$400,000 + $100,000 = $500,000

This adjusted taxable value is then used to calculate property taxes on the new home.

How Proposition 19 Changed Inherited Property Rules

While Proposition 19 expanded benefits for homeowners who move, it significantly restricted property tax benefits for inherited properties.

This change surprised many families and has major implications for estate planning.

What the Rules Were Before Proposition 19

Previously, parents could transfer:

• Their primary residence to children without reassessment, regardless of value

• Up to $1 million of assessed value of other property to children without reassessment

This allowed many families to keep inherited properties with very low property taxes, even if the property became a rental or second home.

New Rules for Parent-Child and Grandparent-Grandchild Transfers

Under Proposition 19, property tax reassessment is avoided only if specific conditions are met.

A transferred property is exempt from reassessment only if:

• The property continues as the primary residence of the child or grandchild

• The transfer is between parent and child or grandparent and grandchild

• The transfer is completed within one year

• The property is not used as a rental or second home

• The property qualifies as a family home or family farm

If these conditions are not met, the property will be reassessed at current market value.

The $1 Million Exclusion Cap Explained

Even when a child or grandchild qualifies by living in the home, there is now a value cap.

General rule:

• The original taxable value may transfer only up to $1 million above the original assessed value

If the market value exceeds that threshold, the taxable value will increase.

Example of How the Cap Works

• Original taxable value: $500,000

• Current assessed value: $2,000,000

Because the assessed value is more than $1 million above the original taxable value:

• New taxable value becomes $1,000,000

This results in a significant property tax increase compared to the original owner’s tax bill.

Why This Matters in High-Value Markets Like Palos Verdes

In communities where property values have appreciated dramatically over decades, inherited homes often exceed the $1 million threshold by a wide margin.

This means:

• Many inherited homes will experience substantial reassessment

• Families may need to sell inherited properties they cannot afford to keep

• Estate planning strategies need to be revisited

Understanding these rules before a transfer occurs is critical.

What Proposition 19 Does Not Do

It is important to clarify common misconceptions.

Proposition 19:

• Does not eliminate property taxes

• Does not apply automatically without filing

• Does not guarantee tax savings in every scenario

• Does not replace the need for legal and tax advice

Each situation is unique and must be evaluated individually.

Why Proper Planning Is Essential

Because Proposition 19 affects:

• Retirement decisions

• Downsizing strategies

• Estate planning

• Family wealth transfer

• Long-term affordability

Homeowners should coordinate with:

• Tax professionals

• Estate planning attorneys

• Real estate professionals familiar with local markets

Mistakes in timing or structure can result in permanent tax consequences.

How Proposition 19 Impacts Market Activity

In my experience, Proposition 19 has:

• Encouraged some longtime homeowners to finally move

• Increased downsizing activity

• Allowed homeowners to relocate closer to family without fear of losing tax protections

• Created urgency around estate planning conversations

At the same time, the changes to inheritance rules have altered how families approach long-held properties.

Final Thoughts

Proposition 19 is neither purely positive nor purely negative. It is a powerful tool when understood and applied correctly, and a costly surprise when misunderstood.

For homeowners considering a move, Proposition 19 can unlock flexibility that did not previously exist. For families planning to transfer property to the next generation, it requires careful planning and informed decision-making.

Understanding the rules before acting is essential.  Make sure to contact your CPA for advice.

Suzanne Dyer
Luxury Real Estate Specialist
Strand Hill | Forbes Global Properties
Over 1 Billion Dollars in Career Sales
Top Realtor in Rolling Hills, Palos Verdes Estates, and the South Bay
310 528 7480 | [email protected]
DRE 01054310