Are you over the age of 55 and have been thinking about selling but don’t want to lose your low taxes? Proposition 19 allows you to sell and keep your low taxes.
Before I talk about Proposition 19 and how it affects property taxes, I want to go over the historical background on how property taxes are assessed.
Proposition 13 was passed in June of 1978. The law established a “base value” and capped property taxes at 1% of that value. For assessment purposes, a property’s value can’t be increased by more than 2% per year (an inflation factor) and the property’s value can’t be reassessed at a higher amount unless its ownership changes or another “reassessment event” occurs, such as a property improvement.
This is why many homeowners have been able to keep their low taxes. When a property does change ownership, the base value is reset at the property’s full market value, the sale price, as of the date ownership changed. Due to this aspect, many homeowners are reluctant to sell even when they need to downsize or want to move to another area. Enter Proposition 19 which took effect on April 1, 2021 and has replaced Proposition 60 & 90. This new law has brought substantial changes to how property taxes are reassessed. These changes not only provide greater flexibility to property owners who are over the age of 55 or disabled, they also apply to victims of natural disasters or wildfires. Proposition 19 allows those that qualify to transfer their taxable base value to a replacement property anywhere in California provided that the property being sold is your primary residence and you purchase another property as your primary residence within 2 years. The replacement property can be of any value (the amount above 100% is added to the transferred value) and it can be done up to 3 times.
Example if the property is of equal or lesser value:
Let’s say you purchased a property in 1990 for $200,000 and it’s now worth $1.2 million. The current property tax is $2500. You sell the property, which is in Cerritos, and you purchase a property in Huntington Beach for $1.2 million. Since the properties are of equal value, the property tax remains $2500. There’s no reassessment.
Example if the property is of higher value:
Your current property is sold for $1.2 million, and a new property is purchased for $1.5 million.
The current base value is $200,000. We would take $1.5 million minus $1.2 million, which equals $300,000 and add that to the base value of $200,000 for a new base value of $500,000.
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