Move to a New Home without a Property Tax Increase
Who Qualifies?
If you’re over 55, have lost your home to a wildfire, or have a permanent disability, Prop 19 makes it easy for you to move to a new home without incurring a property tax increase, saving you thousands of dollars annually.
What Can You Do?
- Move Anywhere in the State of California
- “Downsize,” purchase a less expensive home that better fits your needs
- “Upsize” purchase a more expensive home (increased tax only on the amount higher than the sales price of the current home)
- Transfer your original tax base to a new home up to three times
- Purchasing your new home must be made within two years of the sale of the original
“Downsize” Example
You purchased your home in 1980 for $100,000 and have owned your home for 43 years. Your current assessed value for property taxes is $250,000. The Santa Cruz County General Property Tax Rate is 1.0% plus the various school bonds, etc., add on another .1-.2%, so let’s ‘estimate’ your tax basis at $250,000 *1.2% = $3000/year. The current market value of your home is $1,200,000.
Your grandkids now live in Sacramento, and you want to move to a lovely townhome nearby; the cost of the townhome is $500,000. Property Tax on a $500,000 home at 1.2% = $6,000/year. But with Prop 19, you can sell your home for $1,200,000, take your after-tax proceeds, purchase your new home with cash for $500,000, and take your tax basis of only $3,000 per year with you, so you save $3,000 per year in Property Taxes.
“Upsize” Example
You’ve retired and decided to buy a new home in San Diego for $1,500,000. You can still transfer your $ 3,000 tax basis on your home’s $1,200,000 sales price and only pay the incremental property tax on $300,000. The additional tax would be $300,000 * 1.2% = $3600, so your total tax would be $6,600/year on a property worth $1,500,000. Without Prop 19, your tax would have been $1,500,000 *1.2% = $18,000, so you save $11,400 annually.
Changes for Inherited Properties
Prop 19 does impact property inheritance. You must live in your inherited property as your primary residence to keep the current tax base. If you rent your home out or use it as a second home, the county will reassess your tax basis to the current market value.
Strock Bottomline:
Be sure to consult with your tax accountant or attorney for your specific situation analysis. Contact us if you have any questions about Prop 19; we would love to assist you in selling your property QUICKLY AT THE HIGHEST VALUE.
