Prop 19 -A Substantial Savings for Homeowners Age 55+
California's Proposition 19 (Prop 19) has opened up a world of possibilities for seniors looking to downsize their homes while also enjoying significant savings on property taxes in Los Angeles. Let's break down how Prop 19 works and how it can help anyone 55+, save money on property taxes when downsizing anywhere in Los Angeles County (including any county in California).
Understanding Prop 19
Prop 19 is designed to address two crucial concerns: property tax transfers for seniors aged 55 and older and tax benefits for victims of wildfires and natural disasters. For the purpose of this blog post, we'll focus on the benefits it offers seniors looking to downsize.
The Downsizing Advantage
Under Prop 19, eligible seniors can downsize to a new home and transfer their existing property tax assessment from their previous home to the new one anywhere in California.
Key Points to Note
Eligibility: To qualify for Prop 19 benefits, you must be 55 years or older.
Equal or Lesser Value: The new home must have an equal or lesser market value compared to the original home. This ensures that the transfer applies to downsizing scenarios and prevents potential misuse of the benefit. There will be an adjustment upward in the tax basis if the replacement property is of greater value but this can still prove to be a substantial savings. Ask your tax advisor for more details.
Limitations on Number of Moves: While you can use this benefit more than once in your lifetime, there are limitations. You can only transfer your assessment three times in total.
Principal Residence: You can only use Prop 19 if you're transferring from a principal residence to another principal residence.
A senior couple on a fixed income lives in a home valued at $600,000. They pay $2,200 in property taxes (based on the $200,000 original purchase price). They find a $600,000 home to purchase near family in another county but can’t afford the new $6,600 annual property tax bill that comes with moving – it could cost $4,400 more in annual property taxes to move.
Under Proposition 19: The senior couple can purchase the $600,000 home in another county without a property tax increase. Prop 19 allows these homeowners to transfer the tax base of their original home to the replacement home, saving $4,400 in annual property taxes.
For more information, please consult your tax advisor or contact us.