Do you dream about moving but dread giving up your low property taxes? If you’re over 55, California has a gift for you. In November 2020, California voters passed Proposition 19, which brought significant benefits in property taxes to those savvy about how to use it. Components of the measure deal with inherited property, but right now I want to talk about the part where you can transfer your property tax base, because that can save you a bundle. Proposition 19 allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster, to transfer their lower assessed property value of their primary home to a newly purchased or newly constructed replacement principal residence up to three times (or once per disaster).
This is big because you used to only be able to do this once in your life, and only between 9 counties in the state, but now, you can do it 3 times, and do it anywhere in the state. In California, property taxes are about 1.25% of purchase price, and while your taxes have drifted a bit higher over the years with increased assessments, they stayed tied to your initial purchase price. If you bought your house in 1977 for $100K, you originally paid $1,875/yr in property taxes, and now you pay about $2,762/yr. Now let’s say this is no longer the right house for you, because your kids have grown and you no longer feel like cleaning a big empty house, so you want to move, but you don’t want to give up your low property taxes. Prop 19 is your new best friend. If a person went out and bought a $3M house right now, their property taxes would be $37,500/yr. But if you're the person in the example above, who bought in the 70's for $100k and everyone is very jealous of you, and you now sell your old house for $3M, you can buy a new place for up to $3M, and still pay $2,762/year, saving you $34,738/year! And you can do this 3 times in your life! Although that would require you to live a very long life!
If you buy a more expensive house than the one you sold, the calculation is a little more involved, but you still save a lot. Here’s a calculator to play with: https://ctccal.com/calc
This is a really nice gift that should not be ignored if you are over 55 and wandering around your 5 bedroom house, looking for your keys, and thinking about finally getting that condo with an ocean view that was not right for a family, but could be awesome now that it’s all about you!
Read more here: https://assessor.lacounty.gov/real-estate-toolkit/proposition-19
Another calculator and more info here: https://www.car.org/marketdata/interactive/taxportabilitycalculator
