Proposition 19 may provide the solution you need.
Who Qualifies for Prop 19? Under this law, homeowners aged 55 or older, the severely disabled, and victims of wildfires or natural disasters can transfer the property tax base from their existing home to a new home anywhere in California. This could lead to significant savings on your annual property taxes.
Prop 19 allows you to move anywhere in California and transfer the low property tax base from your original home to a new home, even if the replacement property is of greater value. This transfer can be done up to three times for victims of wildfires or natural disasters.
Inside this Article:
How Does Prop 19 help?
Proposition 19 offers homeowners more flexibility in several key situations:
Downsizing: If you're thinking of moving to a smaller, less expensive home, Proposition 19 allows you to transfer your lower tax base to the new property, even if the condo or home is less costly than your current residence.
Moving Across State: If family ties are pulling you to another part of California, Proposition 19 enables you to keep your cherished tax benefits as you relocate to be closer to loved ones. Purchasing your new home must be made within two years of the sale of the original home.
Disaster Relief: Should your primary residence suffer major damage from a disaster, Proposition 19 permits you to transfer your tax base to a replacement property.
Gifting Real Estate: By gifting property to your children or grandchildren, your loved ones can benefit from lower property taxes - as long as they use the home as their primary residence within a year of the transfer.
Rising Property Values: Prop 19 offers limited tax relief, capping it at $1 million. If your home is valued higher than that, you'll pay more in taxes, but only on the amount exceeding the $1 million threshold. Furthermore, transferring your tax base to an area with significantly higher property values may result in increased future property taxes.
Proposition 19 presents significant opportunities for numerous California homeowners. To help inform your decision-making process, review the following resources:
- California State Board of Equalization
- Pdf Form: Santa Cruz County Reassessment Exclusions for Transfer between Parent & Child
- Pdf Form: Santa Cruz County Reassessment Exclusions for Transfer between Grandparent & Grandchild
- Pdf Form: Santa Cruz County Transfer of Base Value to Replacement Primary Residence 55+
- Pdf Form: Santa Cruz County Transfer of Base Value to Replacement Primary Residence for Severely Disabled
Up Size Example: A family home has a basis (current market value $1,200,000, and the new home purchase is $1,500,000). The difference of $300,000 ($1,500,000 – $1,200,000 = $300,000*1.2%) is added to the property tax rate. If your current tax basis is $4,000 year you would add $3,600 = $7,600. Savings of $1,500,000*1.2% ($18,000-$7,600)= $10,400.
Downsize Example: A family home has a basis (purchase price of $300,000 - 20 years ago, and a current fair market value of $1,500,000). Your current tax basis is $600,000 at approximately 1.2% per year or $7,200. You decide to purchase a condo with your after-tax profits for $1.2M; and save approximately $7,200 per year on taxes.
Please check with your tax accountant, this is not tax advice, just another way to look at Prop 19.
Estate Planning
- Careful estate planning is crucial to minimize unintended tax consequences and financial burdens.
- Prematurely adding your child to the title could trigger immediate tax reassessment
- Gifting property prior to death could forfeits the step-up in basis for capital gains tax purposes
- Oversimplified estate plans may result in a loss of valuable property tax exemptions
- Using entities without professional legal guidance can potentially lead to unfavorable property tax reassessment.
- Lack of planning exposes your estate to potential property tax hikes and may force your heirs to sell the property
Financial Advisors
- Alex Rosenblatt CLTC – Northwestern Mutual
- Mathew Haynes – Sparks Financial
- Cheryl Rebottaro - Edward Jones
- Lanai Financial Solutions
- Beacon Pointe Advisors – Lance Wexler
To learn more, contact me for a no-obligation home valuation and information on what your current home is worth. I'd be happy to discuss how Prop 19 could benefit you.
Paul Burrowes, CRS, CCEC, SFR, NHCP, LHC, REALTOR® Licensed REALTOR® with over 15 years of experience and expertise. Commits to being on time and transparent. Acts as your consultant to ensure you make the best decisions to fit your transaction at every step in the process. Negotiates towards a low stress, win-win outcome. Handles all the details for you, ensuring the hundreds of steps in your real estate transaction go smoothly. Proudly serving Silicon Valley, Santa Cruz, Monterey, and Santa Clara Counties! | DRE# 01955563 | (831) 295-5130 | paul@burrowes.com
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