The good news is that a recently passed law called California Proposition 19, also referred to as Prop 19, gives homeowners aged 55 years and older a tax benefit. H
ave you been looking to move out of Silicon Valley and don’t know how? Or you want to relocate to a quieter and more serene neighborhood but have no specific place in mind? Regardless of your new home, Prop 19 can help you save money. Scroll down to learn more about this new law.
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Prop 19 Explained
This law, which took effect on April 1, 2021, provides homeowners aged 55 years and older who wish to sell their homes a tax benefit. With Prop 19, they can now carry over their existing property tax basis even if the new or replacement primary residence is up to three times more expensive. In the past, eligible homeowners could only transfer their original property tax basis if the replacement primary residence was of equal or lesser value.
To help you better understand the tax benefit of Prop 19, let me tell you a hypothetical situation: Laura has owned a home in Santa Clara County for the last 20 years with a property tax assessed value of $400,000. If she sells her property for $1 million and purchases a new primary residence in California worth $900,000, she can transfer the original taxable value to the new home (i.e., $400,000). Meanwhile, these are some of the other provisions of Prop 19 that specifically benefit senior homeowners in California. They can choose a new or replacement primary residence anywhere in the state and still enjoy tax benefits stated in Prop 19.
By contrast, the previous law limited eligible homeowners to move within the same county or to a limited number of counties that accepted inter-county tax basis transfers. Eligible homeowners can move up to three times and still carry their property tax basis. Meanwhile, those who had lost their homes through natural disasters like wildfire are excluded from this limitation. In the past, eligible homeowners could only transfer once if they wanted to carry their original property tax basis.
More Freedom and Flexibility
Thanks to Prop 19, you can now move anywhere in the state of California rather than be restricted to one area just because of financial concerns. In the previous law (Prop 58), the eligibility in terms of location was very restrictive: Homeowners could only choose a new primary residence in the same county as their old home OR in one of the 10 counties with intercounty ordinances in and around Los Angeles.
Other Eligible Homeowners
Aside from homeowners aged 55 years and older, Prop 19 also allows these individuals to transfer the taxable value of their old home to a new primary residence: Severely disabled homeowners People whose homes were destroyed by wildfire, flooding, and other natural disasters
Other Eligibility Requirements
Prop 19, just like the previous law, only applies if the replacement property will be your primary residence. That being said, vacation homes and rental properties are not eligible for this property tax benefit. Another caveat is the time limit. You can only take advantage of Prop 19 if the sale of your original home and the purchase of your new primary residence occurs within a two-year period. Otherwise, you miss your chance of enjoying its tax benefit.
Prop 19 – Does It Make Sense For You?
Whether you want to downsize or move to a senior-friendly neighborhood, Prop 19 offers tax benefits and flexibility not provided by the previous law. However, you must work with a qualified realtor to ensure that the sale of your old home and the purchase of your new primary residence occurs within a two-year period.
Again, time is of the essence if you want to take advantage of the new tax benefit. By working with a reputable realtor, you can also expect a smooth transition between selling your current home and purchasing your new residence. Plus, you can avoid nasty financial surprises (e.g., unaccounted expenses from buying a new home) that can derail your retirement plans. Transparency and honesty are at the heart of what I do as a real estate specialist, so rest assured that I can help you make sound financial decisions when buying a new primary residence, downsizing, or selling your current home.
Whether you need to sell your existing home, purchase a property, or both, I can help you with your journey. Feel free to call or text at (408) 539-6802 to schedule your initial consultation. I’m excited to hear from you!
During consultation, I may ask you, “where do you want to live next? Near Monterey Coast? Tahoe? Palm Springs? Or are you specifically looking for a charming neighborhood that’s a great place to live and retire?” As a real estate specialist with years of experience, I believe that equipping clients with the right knowledge and asking them about their preferences and short- and long-term goals is the key to helping them find the best home.
Again, please feel free to schedule an appointment with me. Talk to you soon!