Then I have great news to share with you. There are new tax benefits you may be qualified to take advantage of that will allow you to move without big tax increases.
With the recent passage of Proposition 19, homeowners who are 55 and over, severely disabled, or victims of wildfire or natural disaster, may transfer their property tax base of their current home to a new home anywhere in California without price restriction. This is a significant improvement from the requirements of Proposition 13, which was the current law until April 1, 2021.
Proposition 13 has confused most everyone I talk to. I constantly hear “I have Prop 13.” This translates that they have a low property tax bill, and they fear moving would mean it would increase dramatically. But everyone “has Prop 13.”
Under Proposition 13, passed by voters in 1978, all real property in California was assessed at market value when it changed hands. In between sales or transfers, this assessed value could only go up by an inflation rate (capped at 2% a year) plus the value of any new construction or major improvements. And people who were at least 55 or severely disabled could sell their primary residence and transfer its assessed value to a new primary residence if they met three requirements: (1) The home they bought could not be worth more than the home they sold; (2) the new home had to be in the same county as the old one, or in one of 10 counties that accepted incoming transfers of assessed value (Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, Ventura); and (3) they could only do this once in a lifetime.
Prop 19 has new tax benefits for homeowners that are 55 and over, or are severely disabled, or were victims of wildfire or natural disaster. It allows for:
- 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 on a percentage of only the amount that is of greater value of the replacement property).
- 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 means that folks that wanted to downsize are now able to do so without a tax “penalty.”
After all, Proposition 13 was originally designed to help seniors keep a lower property tax bill.
It makes sense that they should be able to keep a low tax bill if they buy of equal or lesser value.
If my 40 years of selling homes in this beautiful valley can save you time and money, please pass this tip to your friends.
If you have a question do not hesitate to ask me.