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  • Writer's pictureNancy Bennett

Reducing Your Property Taxes on a Home: California Proposition 19!



“Sell your primary home and take your property tax base with you!”

Effective 2023

Proposition 19 replaced previous Propositions 60 and 90 on April 1, 2021, allowing eligible homeowners to transfer the taxable value of their existing primary residence to a replacement primary residence. The new law gives homeowners more options for moving to a different home for their retirement years. If you are 55 years old or older and meet the requirements of the law, you can apply your existing tax bill to a replacement home.

This is a wonderful way to save thousands of dollars per year on selling your larger/more expensive home and downsizing into a smaller/less expensive home ANYWHERE IN THE STATE OF CALIFORNIA!

CA Proposition 19 update

Conditions

  • One owner of the original property must be 55 or over.

  • The transfer of taxable value can be filed up to three times by a property owner over their lifetime.

  • The transfer may be within two years of sale of original primary residence. The sale price of this house becomes the full cash value* of the original primary residence.

  • The replacement residence can be of any value, and anywhere within the state.

  • If the replacement residence is of equal or lesser value than the original primary residence, the factored base year value** of the original primary residence may be transferred to the replacement residence.

  • If the replacement residence is of greater value than the original primary residence, partial relief is available. The new base year value of the replacement residence is the sum of the factored base year value** of the original primary residence plus the difference between the full cash values* of the original primary residence and the replacement residence.

  • To qualify for this exclusion, the owner is required to live in the replacement property and must have a Homeowners’ Exemption filed within one year of the transfer.

*Full Cash Value

  • The full cash value of the original primary residence has a different meaning depending on the purchase date of the replacement primary residence:

  • 100% of the amount of the full cash value of the original primary residence if the replacement primary residence is purchased or newly constructed before the sale date of the original primary residence.

  • 105% of the amount of the full cash value of the original primary residence if the replacement primary residence is purchased or newly constructed within the first year following the sale date of the original primary residence.

  • 110% of the amount of the full cash value of the original primary residence if the replacement primary residence is purchased or newly constructed within the second year following the sale date of the original primary residence.

**Factored Base Year Value

The factored base year value is the market value as of 1975 or as established when the property last changed ownership or was modified due to construction. This amount is then increased by no more than 2% each year.

Examples

These examples show the savings in property taxes if the price of your replacement home is higher than the value of your original home.

Original house sold for $1M.

Replacement house purchased for $1M

Difference: 0

Factored base year value of original house: $325,000

New base year value of replacement house: $325,000

Annual property tax on $1M at 1.25% = $12,500 (without Prop. 19)

Annual property tax on $325,000 at 1.25% = $4,063 (with Prop. 19)

Savings: $8,438 per year x 10 years = $84,380 savings !

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Original house sold for $1M.

Replacement house purchased for $1.2M

Difference: $200,000

Factored base year value of original house: $325,000

New base year value of replacement house: $325,000 + $200,000 = $525,000

Annual property tax on $1.2M at 1.25% = $15,000 (without Prop. 19)

Annual property tax on $525,000 at 1.25% = $6,563 (with Prop. 19)

Savings: $15,000 – $6,563 = $8,437 per year x 10 years = $84,370!!!

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Original house sold for $1M.

Replacement house purchased for $1.5M

Difference: $500,000

Factored base year value of original house: $325,000

New base year value of replacement house: $325,000 + $500,000 = $825,000

Annual property tax on $1,500,000 at 1.25% = $18,750 (without Prop. 19)

Annual property tax on $825,000 at 1.25% = $10,313 (with Prop. 19)

Savings: $18,750- $10,313 = $8,437 per year x 10 years = $84,370 !!!

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You can see that the property tax in these examples increases from $4,063 to $10,313 per year as the cost of a replacement house exceeds the value of an original house. However, Prop. 19 still provides a saving ($8,437 per year in this example) for a more expensive house.

Questions about Proposition 19

The California legislature and the State Board of Equalization have addressed many questions concerning Proposition 19; for example:

  • How to evaluate factored base year value of new construction or part of multi-unit property.

  • Dealing with co-owners.

  • Dealing with gifted properties.

  • Dealing with mobile homes.

For answers to your questions, contact the Property Tax Department by phone or email and/or consult the State Board of Equalization and your tax advisor. I am not a tax advisor nor am I licensed for anything other than being a Realtor and foster parent.

To lookup your current assessed home value – see it at the Contra Costa Tax Assessor’s office: https://taxcolp.cccounty.us/taxpaymentrev3/lookup/


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