Over 55? Help is on the Way with Prop 19!
One of the most significant questions which Californians over the age of 55 have had to address when deciding whether to buy or sell their home is the impact of Property Tax Expenses.
The state charges owners of real property a tax on an average of 1.25% of a property’s value as assessed by the Tax Assessor’s Office.
In 1978, voters passed Proposition 13 which set the property tax at the property’s purchase price and generally limited future tax increases to no more than 2% annually.
Since the Proposition 13 benefits end when a person moves or transfers the real property to anyone other than a child or grandchild, people have tended to stay in their homes much longer. Selling and buying another home is not worth the tax increase. This has resulted in less homes available for re-sale and homeowners over the age of 55 equity rich and cash-poor. Furthermore, as homeowners age, it becomes difficult sell their homes and move near children or other family members.
Property Tax Limits with the Passage of Proposition 19:
A homeowner who is over 55 years of age, severely disabled or whose home has been substantially damaged by wildfire or natural disaster may transfer the taxable value of their primary residence to:
- A replacement primary residence
- Anywhere in the state
- Regardless of the value of the replacement primary residence (with adjustments if “greater” in value)
- Within two years of the sale
- Up to three times (but without limitation for those whose houses were destroyed by fire)
The ability to transfer Proposition 13 tax benefits from one property to another is called Property Tax Portability.
When does the tax basis portability portion of Prop 19 take effect?
Although we believe that the tax benefits under Proposition 19 apply to transactions where either the sale or purchase of a primary residence takes place before April 1, 2021, as long as the subsequent sale or purchase takes place within two years and on or after April 1, 2021, others have taken the position that both the sale and purchase must occur on or after April 1st, 2021.
Proposition 19 allows both those over 55 and the severely disabled to use this exemption up to three times.
If you want clarification on any of the information published, please feel free to email me at homes@souzateam.com or call me at 510-881-1761.
-Dean Souza, Realtor CA DRE 00967442
Century 21 Real Estate Alliance
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For more information on how this proposition may affect your current situation, please consult the State Board of Equalization’s website and/or legal counsel. The information above is intended to provide a general summary. Proposition 19 is a constitutional amendment, so additional legislation, regulations, and statewide guidance are expected to clarify its implementation.
