Since 2010, over 650,000 Californians have received a tax break that allowed them to maintain tax breaks when they inherited a home. With the passage of Prop 19, that will no longer be the case for many. So why was Prop 19 a good idea, and why did the California Association of Realtors not only support the measure, but actively fund a campaign in favor?
On the surface, the law seems like a simple revenue generating scheme. And, indeed, with tens of thousands of homes that will end up going on the market as a result of the looming increases, hundreds of millions of dollars will flow into state and local coffers. Wisely, though, the law earmarks this money for specific programs:
- Helps millions of seniors and disabled with housing relief if they sell their big homes to move into smaller homes or communities;
- increases fire protection in rural communities, and allows those who were forced to move due to wildfires to maintain their legacy tax bases;
- Provides protections for family farms and ranches to maintain generational ownership;
Importantly, children who inherit the home from a parent or grandparent will enjoy the same tax base as before as long as they use the home as their primary residence.
Furthermore, Prop 19 closes loopholes that allowed out-of-state investors and wealthy individuals with multiple properties to enjoy low tax rates on dwellings used primarily as rental housing.
The result, say supporters, will be thousands of previously “locked-up” houses returning to the market. This will create buying opportunities for an entire new generation of homeowners and renters while spurring revitalization of neighborhoods.
If you have a dwelling that will be affected by this new law, contact Gaetani today and we’ll walk through the numbers with you to help you determine if it’s more advantageous for you to hold on to the property or sell. Depending on your specific situation, this could be an opportunity to make an important strategic move.
Photo: Andy Maguire via Flickr / Creative Commons License