A few California-specific rules that come up constantly, explained plainly. None of this is a substitute for advice from a tax professional or attorney on your specific situation, but it’s a solid starting point.
What Is Prop 19 and How Does It Affect My Property Taxes?
Proposition 19 changed the rules around transferring a property’s tax base, most notably for homeowners 55 and older, severely disabled homeowners, and wildfire victims, allowing them to transfer their existing property tax base to a replacement home in California under certain conditions. It also changed the rules around inherited property, generally requiring a reassessment unless the property becomes the heir’s primary residence. If this applies to your situation, it’s worth a direct conversation with a tax professional about the specific numbers.
Can an ADU Generate Rental Income?
Yes, an accessory dwelling unit (ADU) can be rented out for additional income, and California has made ADU construction meaningfully easier in recent years through statewide zoning reforms. If you’re buying a property specifically for ADU potential, confirm the specific lot’s zoning and any local restrictions before assuming it’s straightforward.
What Is a 1031 Exchange, and Who Should Use It?
A 1031 exchange lets an investor defer capital gains tax by rolling proceeds from a sold investment property into a new one, under specific IRS timing and structuring rules. It’s relevant for investment or rental property, not a primary residence, and it requires working with a qualified intermediary and strict deadlines. This is squarely a conversation for a tax professional experienced with 1031 exchanges before you commit to a sale.
What’s a Natural Hazard Disclosure Report?
California law requires sellers to disclose whether a property sits in a designated natural hazard zone, flood zone, fire zone, earthquake fault zone, and similar. This report is a standard part of any California transaction and is worth reading carefully rather than skimming, since it affects both safety and insurance considerations.
What Is Mello-Roos Tax, and Does It Apply to My Area?
Mello-Roos is a special tax district some California communities use to fund infrastructure, schools, or services, layered on top of standard property tax. Not every area has it, and where it exists, it’s disclosed as part of the transaction. Ask directly whether a specific property carries a Mello-Roos assessment before you finalize your budget.
If you have a specific legal or tax question about a California transaction, get in touch and Efrat can point you toward the right resource or professional.