Proposition 19 Can Save You Money!
Proposition 19
Understanding Prop 19 can be confusing. Below are highlights:
Information deemed accurate but not guaranteed.
- Proposition 19 replaced Prop 60 and went into effect April 1, 2021.
- With Prop 60 a homeowner 55 or older could transfer their entire lower property tax basis to a newly purchased primary residence, but only if the new home was equal to or less than in value, could only be used one time, & only certain counties participated in the program.
- Prop 19 now allows homeowners 55 or older to sell their primary residence & transfer their lower property tax basis to a more expensive home anywhere in California, and can be repeated up to three times.
- The "entire" lower tax basis can only be transferred to a newly purchased home if the home you are buying is "equal to or less than" the home you are selling. If the the home you are buying is "more" than the home you are selling then a "blended" property tax assessment will be allowed. The "blended tax assessment" will be calculated by taking the difference in increased value between the two homes, and then adding it to the original tax value of the old home. Thus, resulting in a higher property tax assessment than before, but it is still substantially less than what the property tax basis would have been without the "blended tax"
- You have 2 years from the time of the sale to purchase a replacement home otherwise you forfeit your ability to take advantage of Prop 19.
- Prop 19 only applies to primary residences & homeowners over 55. Rentals and/or vacation properties are not eligible for this property tax benefit
- Prop 19 has stricter rules on how one can inherit property in California. If you plan to leave real estate to your children, passing the property tax basis to them is now much more limited. For instance, the child (or children) must use the property as their principal residence immediately after death or gift in order to avoid triggering a property tax reassessment.
Hypothetical Example
Say you owned your personal residence in San Diego for the last 30 years & your property tax value is only $300,000. If you sell your home for $1,000,000 and purchase a new home anywhere in California for the same amount or less you can transfer your entire previous taxable value to the new home (e.g. $300,000)
However if you want to upgrade to a $1.5 million home your new home`s taxable value will be $800,000. The calculation is the difference in increased value between the 2 homes ($500,000) plus the original tax value ($300,000) equals $800,000. It`s a higher proper tax value than before but its still substantially less than what the property tax valuation would have been on the new 1.5 million dollar home.
Want More Information?
Call the Riverside County Assessor`s office @ 951-955-7007 or consult your financial/tax advisor advisor.
