Attention Seniors (55+): Here’s What You Need to Know About Proposition 19
If you’re over 55 and living in California, this is important information about Proposition 19 that could save you thousands on your property tax bill each year. I’ve recently come across this issue with several clients, and knowing the details could make a big difference for you.
The Situation
Nearly 50% of homes sold recently in San Diego County were sold by empty-nesters and baby boomers. With changes to Proposition 19 (effective April 1, 2021), many of these homeowners are taking advantage of property tax savings as they move into the next phase of their lives.
In the past, many homeowners felt trapped in their homes, unable to move for fear of significantly higher property taxes. That’s no longer the case. Thanks to Proposition 19, you can now move to a new home anywhere in California and keep your current property tax base. This change took effect on April 1, 2021.
How It Works
Let’s say you bought your home years ago for $400,000, and it’s now worth $1 million. You’re probably still paying taxes based on the original $400,000 assessed value (plus the small annual increases allowed under Prop 13). At a 1% tax rate, you’re paying about $4,000 a year in property taxes.
Before Prop 19, if you moved to another home with the same $1 million value, your taxes would be reassessed based on the new home’s market price, jumping to $10,000 a year. That’s a $6,000 (150%) increase just for moving to a similar-value home.
But now, you can sell your $1 million home, buy a new one for the same price, and keep your $400,000 tax base. Your property taxes would still be based on $400,000, saving you about $6,000 annually!
Key Points to Remember:
- You must be 55 or older.
- Both the home you’re selling (relinquished property) and the new home (replacement property) must be in California.
- This property tax benefit applies only to your primary residence.
- You can transfer your tax base up to 3 times in your lifetime.
- The sales price of your current home sets your “cap” (there’s no limit on how expensive the new home can be).
- If you buy a new home for less than your cap, your current tax base transfers over with no increase.
- If you buy a more expensive home, only the amount above your cap gets reassessed and gets added to your existing tax base. Your taxes will increase.
- You can defer buying your replacement home for up to 2 years:
- In the first year, you can add 5% to your cap.
- In the second year, you can add 10%.
- To qualify, you must submit a one-page application to the San Diego County Assessor’s office (SDARCC).
- Application link: Prop 19 Senior Transfer Application
There are more details to consider, and every situation is different, so feel free to reach out with any questions. For now, here are some additional resources:
- Video: Prop 19 Property Tax Savings
- Slide Deck: Prop 19 Slide Deck
Keep in mind that there is a second part to Prop 19. It also includes a Parent-Child Reassessment Exclusion—but that’s a topic for another day.
If you’d like to discuss this article or have any other real estate questions, feel free to contact us anytime.
