Have you thought about selling and moving but are worried about property tax increases?

Then I have great news to share with you. There are new tax benefits you could be qualified to take advantage of that will allow you to move without big tax increases.

With the passage of Proposition 19, homeowners who are 55+, severely disabled or victims of wildfire or natural disaster may transfer their property tax base of their existing home to a new home anywhere in California without price restriction. This is a significant improvement from the current law that is confusing, unfair and limiting.

Prop 19 new tax benefits for homeowners 55+, severely disabled, or victims of wildfire or natural disaster, as of April 1, 2021 include:

  • Moving anywhere in California: Prop 19 removes location restrictions on property tax transfers allowing the transfer of the property tax base of an existing home to a new home anywhere in California.
  • Moving to any home regardless of price: Prop 19 removes price restrictions on property tax transfers allowing the transfer of the property tax base of an existing home to a new home regardless of price (with an adjustment upward to their tax basis if the replacement property is of greater value).
  • Transferring the low property tax base of your original home to a new home up to THREE times (or more for victims of wildfire or natural hazard).

This could result in substantial savings in annual property taxes!

These new tax benefits go into effect April 1, 2021.  

How does Prop 19 work when purchasing a new home for the same price (or less) than the original home?

Transferring Tax Benefits to a New Home Across County Lines: If the purchase price of the replacement home is equal to (or less than) the sales price of the existing home, even if the replacement home is in another county, the tax base of the replacement home will remain the same as the original residence. (“Sales price” means full cash value.)
  • Example #1: A senior couple on a fixed income lives in a home valued at $600,000. They pay $2,200 in property taxes (based on the $200,000 original purchase price). They find a $600,000 home to purchase near family in another county but can’t afford the new $6,600 annual property tax bill that comes with moving – it could cost $4,400 more in annual property taxes to move.
  • Under Proposition 19: The senior couple can purchase the $600,000 home in another county without a property tax increase. Prop 19 allows these homeowners to transfer the tax base of their original home to the replacement home, saving $4,400 in annual property taxes.

How does Prop 19 work when purchasing another home that costs more than the sales price of the original home?

If the sale price of the replacement home costs more than the price of the existing home, qualified home- owners can blend the tax base of their original home with the tax base of the new home. The new, ad- justed property tax base of the replacement home takes the tax base of the original home and adds the difference between the sale price of the new home and the original home. (“Sales price” means full cash value.)
  • Example #2: Another senior couple with a home valued at $600,000 (also paying $2,200 in property taxes) wants to downsize from the two-story home that is too big for their needs, is too expensive to maintain, and has stairs that are difficult for them to use. They want to downsize to a more manageable home in a newly built retirement community nearby for $700,000, but they can’t afford the $7,700 spike in property taxes that comes with moving.
  • Under Prop 19: This couple will save $4,400 in annual property taxes. Prop 19 allows homeowners to keep their existing Prop 13 tax base and transfer it to a more expensive home. The property tax base of the new home is determined by adding the difference between the sales price of the replacement home ($700,000) and the original home ($600,000) to the tax base of the original home ($200,000). In this example, the couple would pay $3,300* in property taxes, instead of $7,700 in property taxes. (*The tax savings could be greater depending on the definition of “equal or lesser” value).

For transactions involving either the sale or purchase of a primary residence that close before April 1, 2021, please consult with your qualified estate planning or real estate attorney.