Prop 19 – How does it work and who does it benefit?

Prop 19 – How does it work? What would my new taxes be? How does it relate to inherited property?
Proposition 19 Fact Sheet.pdf

California Proposition 19, which was enacted in 2021, is something that can be very helpful to relocate your home in retirement or when preparing for retirement.

It ‘allows homeowners who are age 55 or older, or severely and permanently disabled of any age, to transfer the “taxable value” of their principal residence to a replacement property up to three times anywhere in the state. “Taxable value” means the base year value plus inflationary adjustments, commonly referred to as a factored base year value. There is no limit to the market value of the replacement property compared to the original property, but the amount in excess of the original property’s market value is added to the transferred value. The replacement’s market value can exceed the original’s market value up to one hundred and five percent (105%) if the replacement is purchased within the first year after the sale of the original, or one hundred and ten percent (110%) in the second year with no excess added to the transferred taxable value.’

For example, if you buy a replacement home for the same price as what you sold your current home for your property tax bill would be virtually the same. However, if you choose to purchase a home that is greater than the price you sell your current residence for the difference between the sold price and the new purchase price would be taxed at the normal rate for that city/county of the new property and added to the tax basis of the departing residence. This would minimize the amount of the increase in your property taxes for the new home. It’s something to certainly factor into your plans when you determine if a move is right and feasible for you. It can be used 3 times in a lifetime. Please refer to the Fact Sheet above for all the details which also details how inherited property would be reassessed.

If you’re 62 years old and would like to move your primary residence you can do it with a Reverse Mortgage, too. It’s not just for refinancing a home but can be used when making a home purchase, too. It can significantly increase your monthly cash flow and allow you to maintain your lifestyle in retirement because a payment is not required other than keeping your property taxes and homeowners insurance current. It has been used by many to refinance their mortgage so they could retire in place, but it can also be used to purchase a home so you can retire where they want to. It is definitely something to at least review and understand when making a home purchase if you qualify by age.

If you fit the criteria and are interested to learn more about Prop 19 and/or the reverse mortgage process, please let me know and we can talk about the details.