Prop 19 - What Does it Mean for Homeowners?
Jacolyn Bron - Bron Realty Group
In November, California passed Prop 19 which further expands on Prop 60/90. Simply put, Prop 60/90 allowed homeowners over the age of 55 (once in their lifetime only), to sell their primary residence and carry-over their original low property tax basis to the newly purchase primary residence (home or condo). The new primary residence had to be valued at equal or lesser value than the market value of the home they sold and this would only apply if the new home was located in 9 specific California Counties.
Prop 19 takes away Prop 60/90 limitations: Now, homeowners over 55 will receive a property tax benefit also when they buy a more expensive home and this is anywhere in the state ( previously it was just in 9 counties) and can sell and buy up to 3 times. Previously this tax break was only allowed for one purchase even for couples. Homeowners with disabilities will be able to do the same, and victims of wildfires and other natural disasters will be able to do so after their home is damaged.
John Smith buys a house in Mar Vista for 250k in 1980. He pays approximately $3,750 a year in property tax (prop is assessed today at 300K due to the 2% reassessment increase allowed by Prop 13).
He sells his house in 2020 for $1.2M and buys a new condo in Long Beach for 700K which would amount to $8,750 in property tax a year.
With Prop 19, John can carry-over his old property tax ($3,750) with him to the new condo instead of paying $8,750. A savings of $5000 a year!
There is also savings if you buy a property that’s more expensive. The difference in price between the two is what you would pay taxes on, in addition to the original property tax you have brought over with you.
For a lot of seniors, who are looking to cash in their equity and move closer to their family or downsize, this is a godsend. Especially if they have been living in their current home for 20 years or more.
All in all, Prop 19 is great news for seniors who want to sell and stay in California but were hesitant to move because of the fear of increased property taxes.
You should consult with a tax professional prior to making any tax related decision.