You’ve most likely heard of Proposition 19, but what is it – and how does it affect you? This guide explains California Proposition 19 and how it may affect you and your family. If you’re not sure how the proposition affects you, you should consult with your accountant, an attorney, or a financial professional before you make a move. With that said, this guide explains the law and how it works.
What is California Proposition 19?
California Proposition 19 provides seniors, retirees, and all homeowners who are 55 or older the opportunity to move anywhere in California without forcing them to pay a tax penalty. The proposition removed location and price restrictions that previously prevented older homeowners from transferring their home’s tax base to a new home. It also removed restrictions on California homeowners with severe disabilities, allows victims of natural disasters (including wildfires) to transfer the property tax base of their damaged home to a new home anywhere in California, and indirectly increased the inventory for first-time and subsequent homebuyers all over the state.
Are There Any Restrictions on Prop 19?
There are still some restrictions on homeowners transferring their low property tax base to another home under Proposition 19. However, qualified homeowners can do so regardless of the cost of the replacement home – though there is an adjustment upward to their tax basis if the replacement property is worth more. The original property and the replacement property must both be the homeowner’s principal residence, and you can only transfer the property tax base up to three times.
Who is Eligible for Protection Under Proposition 19?
Homeowners who are eligible for the protections of Proposition 19 are:
- 55 years of age or older
- Severely disable
- Victims of natural disasters, including wildfires
The law took effect on April 1, 2021, so currently, anyone who is eligible can take advantage of these benefits.
Related: What is a cap rate in real estate?
What if You Change Counties?
As of this writing, the following ten counties allow intercounty base transfers:
- Los Angeles
- San Bernardino
- San Diego
- San Mateo
- Santa Clara
More counties may join later.
What About When the New Replacement Home Has a Different Cost?
You can transfer your tax benefits whether your replacement home costs less or more than your original home.
If the replacement home’s cost is equal to or less than the sales price of the existing home, the tax base of the replacement home remains the same as the tax base of the original residence.
If the replacement home’s cost is greater than the sales price of the existing home, qualified homeowners can blend the tax bases of both locations. They’ll have a new, adjusted property tax base that reflects the difference between the new home’s sale price and the original home.
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