Proposition 19 - Part-3: Moving or Downsizing in Retirement?
In Part-1 and Part-2, I had focused on properties passed from parents to children. This blog focuses on a different aspect of Proposition 19. Proposition 19 expands the class of people who qualify for a transfer of their tax basis from their current home to a new home.
Currently in California, Propositions 60 and 90 dictate who can transfer their current property tax basis to a new home.
According to Proposition 60 (effective November 4, 1986), individuals over 55 may transfer their property tax basis to a property of equal or lesser value in the same county.
Proposition 90 (effective November 6, 1988) extended the above and allowed individuals over 55 to transfer their property tax basis to a property of equal or lesser value in one of the following nine counties: Alameda, Los Angeles, Orange, Riverside, San Bernardino, Riverside, San Diego, San Mateo, Santa Clara, Tuolumne, Ventura. El Dorado County eliminated protection in 2018.
Propositions 60 and 90 limited homeowners to transfers within certain counties and to homes of the same or lesser market value, and this is allowed only once in lifetime.
Proposition 19 changes this and eligible homeowners can now transfer their tax basis anywhere within the State and to a property of any value (with a caveat). Proposition 19 also increases the number of times that certain people may transfer their tax assessments. If a person is 55 years or older, has severe disabilities, or lost a home in a natural disaster, the person may transfer their tax assessment up to three times now. Victims of a wildfire or natural disaster may make unlimited transfers, without regard to age.
The new law also allows homeowners to buy a replacement home that is worth more than their old home. However, the increase in value is added to the transferred taxable value of the old home. For example, assume the home of a couple over 55, has assessed value of $500k. The couple sells their home for $2 million and buys a new home for $4 million. The new home’s assessed value would be $2.5 million, which is the $500k assessed value, plus the $2 million difference in the two home values.
The new law comes into effect on April 1, 2021.
Some sources for more information: