The recent Palisades Fire has left many homeowners facing the challenge of rebuilding or relocating after the destruction of their primary residences. Understanding California's property tax relief options is crucial in these circumstances. Proposition 19, which replaced Propositions 60 and 90, offers significant benefits: it allows eligible homeowners to transfer the taxable value of their damaged or destroyed home to a new primary residence, potentially resulting in substantial property tax savings.
Overview of Proposition 19
Enacted in 2021, Proposition 19 enables homeowners aged 55 and older, those with severe disabilities, or victims of natural disasters to transfer the assessed value of their original residence to a replacement home anywhere in California. This provision is particularly beneficial for those affected by disasters like the Palisades Fire, as it helps maintain a lower property tax base when acquiring a new home.
Eligibility Criteria
To qualify for the benefits under Proposition 19, homeowners must meet the following requirements:
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Age or Disability: At least one homeowner must be 55 years of age or older, or be severely and permanently disabled, at the time of the sale of the original property.
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Primary Residence: Both the original and replacement properties must serve as the homeowner's principal residence and be eligible for the Homeowners' Exemption or Disabled Veterans' Exemption.
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Value Comparison: The market value of the replacement property can be equal to, less than, or greater than that of the original property. If the replacement property is of greater value, the difference will be added to the transferred taxable value, resulting in a modest increase in property taxes.
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Timing: The replacement property must be purchased or newly constructed within two years before or after the sale of the original property.
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Transfer Limit: Eligible homeowners can utilize this tax relief up to three times. However, there is no limit for those whose properties were destroyed by a declared disaster.
Steps to Transfer Your Tax Base
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Assess Your Situation: Confirm that you meet the age or disability requirements and that your original property was substantially damaged or destroyed in a disaster declared by the Governor.
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Identify a Replacement Property: Find a suitable replacement home anywhere in California that meets your needs and financial considerations.
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Complete the Transaction: Purchase or construct the replacement property within the specified two-year timeframe relative to the sale of your original property.
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File a Claim: Submit a claim to transfer the base year value to the assessor's office in the county of the replacement property. This should be done promptly to ensure the tax benefits are applied in a timely manner.
Additional Property Tax Relief
In addition to Proposition 19, homeowners whose properties have been damaged or destroyed may be eligible for property tax relief through reassessment of their property’s value to reflect the loss. This can result in a temporary reduction in property taxes until the property is repaired or rebuilt. To qualify, homeowners must file a claim with the county assessor within 12 months from the date the property was damaged or destroyed. The loss must exceed $10,000 of current market value. You can click here for more resources: recovery.lacounty.gov
Impact of the Palisades Fire on the Local Real Estate Market
The aftermath of the Palisades Fire has significantly impacted the local real estate market. Many homeowners are opting to sell their fire-damaged lots rather than undertake the costly and time-consuming rebuilding process. This trend indicates a robust demand for land in the area, despite the recent devastation.
However, rebuilding costs are steep, with estimates reaching approximately $1,000 per square foot. This financial burden, coupled with potential underinsurance issues, has led many, especially seniors, to consider relocating. Utilizing Proposition 19 can alleviate some of the financial strain by allowing eligible homeowners to maintain their previous property's tax base, making the transition to a new home more affordable.
Navigating the aftermath of a disaster like the Palisades Fire is challenging, particularly for homeowners of a certain age facing decisions about their primary residences. Proposition 19 offers a pathway to financial relief by enabling the transfer of property tax bases to new homes anywhere in California. By understanding and leveraging this provision, eligible homeowners can make informed decisions that ease the financial impact during such trying times.