What is California Prop 19?
A constitutional amendment effective Feb 16, 2021. Two parts: (1) Portability for homeowners 55+, severely disabled, or wildfire/disaster victims — they can transfer their existing low property-tax basis to a new home up to 3 times statewide. (2) Inherited-property rules tightened — children inheriting a parent home only keep the low tax basis if they make it their primary residence within 1 year AND only on the first $1M of assessed value above the parent original basis.
How does Prop 19 affect Bay Area families who inherit a home?
Significantly. Before Prop 19, adult children could inherit a parent home and keep the parent low property-tax basis even as a rental. After Prop 19, the child must occupy the home as primary residence within 1 year, OR the home is reassessed to current market value — adding tens of thousands per year in property tax. For most Bay Area inheriting families, selling within ~12 months is now the standard play.
What is the 1-year rule?
If you inherit a parent home and want to keep their low property-tax basis, you must (a) move in within 1 year AND (b) file the homeowner exemption AND (c) keep it as your primary residence. Even then, only the first $1M of value above the parent original purchase price keeps the low basis; anything above resets to market.
What is the $1M cap?
When children inherit a primary residence, the property-tax assessed value gets adjusted IF current market value exceeds parent original purchase basis by more than $1M. Example: parent bought in 1980 for $200K, current value $1.4M. The first $1M above parent basis ($200K → $1.2M) keeps the parent low basis. The remaining $200K of value above that adds to assessment.
I am 55+ and want to downsize within California. How does Prop 19 help?
Huge. You can sell your current Bay Area home and buy a replacement anywhere in California, and you can transfer your existing (low) property-tax basis to the new home — up to 3 times in your lifetime. This is a 100% structural advantage for downsizing seniors.
Can I transfer my tax basis to a more-expensive home under Prop 19?
Yes, but with adjustment. If the replacement is equal-or-less value, you keep the full original basis. If more expensive, the difference is added to your basis. Example: sell $1.2M home, buy $1.5M replacement — your new tax basis = original basis + $300K.
What is the deadline to transfer the basis?
Within 2 years of the sale of your original primary residence. The replacement purchase must close in that window.
Does Prop 19 affect my property tax if I just stay in my home?
No. Prop 19 only affects (a) transferring your basis to a NEW home (portability — favorable), and (b) inheriting from a parent (tightened). If you are not moving and not inheriting, your tax bill is unchanged.
What if I inherit and want to rent the home instead of moving in?
Property gets reassessed to current market value. For Bay Area homes purchased decades ago, this typically increases annual property tax by $10-30K. Most inheriting families either move in within 1 year or sell within 1 year — renting rarely pencils after the tax shock.
I am inheriting a Bay Area home — should I sell or move in?
Depends on your life situation. Move in: keeps the low tax basis, often saves $10-30K/year. Sell: realizes the equity, avoids the move, often the right answer for adult children with established lives elsewhere. Roger walks each family through the specific numbers.
How does this interact with the step-up basis?
They are separate. Step-up basis (federal income tax) resets your cost basis to date-of-death value, eliminating federal capital-gains tax if you sell quickly. Prop 19 (California property tax) is about ongoing annual property tax. Different layers; both matter.
What about parent-to-child transfers of rental property?
No longer protected under Prop 19. Inherited rental property is reassessed to current market value — full stop. Most Bay Area families with parent-owned rentals are accelerating sale-or-restructure decisions.