Each state tries to generate revenue one way or another to fund the things residents expect from governing bodies like firefighters, cops, schools, and infrastructure.
California’s Prop 19 aims to change taxes, and it’s targeting residential real estate. People might like some things in this bill but not others, which means it’s vital to understand the pros and cons.
The Big Tax Perk
When someone buys a home in California, the property taxes go up, and that’s something most people know. The interesting thing is the property taxes are based on the value of the property at the time of purchase. An older person who bought a home a long time ago is probably paying pennies compared to someone who just purchased a home.
This means seniors are stuck in their homes. They have the freedom to buy a new house but will have to deal with higher property taxes. Prop 19 allows seniors to transfer the low property taxes they’re enjoying to another home if they want to buy a new one. Real estate agents will be happy about this because now they have a reason to approach boomers who might not have been searching for a home before.
Inheritance Complications
Amassing wealth to pass on to family is most people’s goal. Passing down residential real estate is great, but there are a few things to keep in mind. Smart folks take care of the will and talk to their attorney to make sure there are no issues. If that hasn’t happened yet, San Diego based estate planning attorney Justin Isaac says you should plan your will with an attorney to ensure that “loved ones are protected from the complicated and time-consuming process of the California probate courts.”
Isaac and other estate planning attorneys realize that on top of some of the complications already present in the process of leaving property to your family, Prop 19 is going to make things more complex. The tax break people hope to leave to family could go away. If one decides to rent the property out, they’ll miss out on that tax break with Prop 19. Addressing these details ensures parents leave a gift behind rather than a headache to deal with.
Heir Fairness
A big reason parents want to pass down real estate property to their children is because they want them to live a better life, and some believe they should inherit the tax break. Others may feel that the younger Americans will be paying less into the system than the rest of their fellow citizens; parents worked hard to get the deal they got, but their kids didn’t.
Some people think inheriting a property is enough. They should figure out a way to pay the taxes everyone else has to deal with. Paying dues is just part of being an American because a citizen’s money is collected to help everyone. This depends on a person’s perspective, but some folks love the fact that heirs won’t be able to evade today’s taxes because of those who came before.
Real Estate Affordability
Since some heirs might not want to keep a property they can’t make money with; they might just sell it. A lot of real estate agents are excited about this because it means more real estate will be on the market. This can keep houses affordable and could encourage Californians to buy more property.
The bad side of this is that some heirs might keep the property and make it a rental. The taxes on the rental property will skyrocket, and that’s not good for renters. Most of the time, owners don’t absorb the taxes to keep rent low for people; they usually dump the spikes on renters by increasing the rent. California is going through a rental affordability crisis, and this could cause more home insecurity for renters all over the state.
Prop 19 would change a few things, and it’s a good idea to learn how those changes would affect people.
