What is Proposition 19?
On November 3, 2020, California voters approved Proposition 19, the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a constitutional amendment that limits people who inherit family properties from keeping the low property tax base unless
they use the home as their primary residence. It also allows homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster to transfer their assessed value of their primary home to a newly purchased or newly constructed replacement primary residence up to three times.
The base year value transfer element of the amendment is exciting as it offers a wonderful opportunity for seniors who want to move but feel stuck in their home. This amendment provides much needed housing relief for seniors, making it more affordable to move to a new home that better suits their needs.
Proposition 19 opens up new doors for Californians. For example, those wanting to move and take advantage of property tax savings can now look across the entire state. Often their home is too big, requires too much maintenance (or has a lot of deferred maintenance), is too far from family, and has too many steps. Secondly, many seniors who have lived in their home for many years find themselves property rich and cash poor. The added tax benefits from Prop 19 may make selling the family home and converting some of the equity to cash even more attractive and prudent.
Here are the most common questions about Prop 19 answered in simple terms:
How does Prop 19 work for seniors?
Effective April 1, 2021, Proposition 19 permits eligible homeowners (defined as over 55, severely disabled, or whose homes were destroyed by wildfire or disaster) to transfer their primary residence's property tax base value to a newly purchased or constructed replacement residence of any value, anywhere in the state of California up to 3 times.
How does Proposition 19 affect property taxes?
Property taxes are affected in one of two ways:
1. For any transfer of taxable value to a replacement primary residence of equal or lesser value than the original primary residence, the taxable value of the replacement primary residence shall be deemed to be the taxable value of the original primary residence. Translation – you can buy a new home for equal value to your current home and your property taxes will not increase
2. For any transfer of taxable value to a replacement primary residence of greater value than the original primary residence, the taxable value of the replacement primary residence shall be calculated by adding the difference between the full cash value of the original primary residence and the full cash value of the replacement primary residence to the taxable value of the original primary residence. Translation - you can buy a more expensive home and utilize a blended property tax assessment.
This may sound complicated, but it’s actually a fairly simple calculation and can easily be included in a buy/sell analysis that many real estate agents will provide at no cost or obligation.
How do you qualify for Prop 19?
To qualify for a Prop 19 tax base transfer, a few criteria must be met. First, either the claimant or claimant's spouse must be age 55 or older when the original residence is sold. Second, the replacement residence must be purchased within two years either before or after the current residence is sold.
So, for those 55 and over wanting to move closer to kids and grandkids, or for better weather, or simply to enjoy retirement in a location they’ve been dreaming about, Prop 19 gives them that freedom while keeping money in their wallet. Additionally, in the past, buyers would often agonize over the decision about where they should move to because they could only take advantage of the tax savings just one time. But now, Prop 19 allows buyers to move up to three times while keeping their low tax base, so they no longer feel stuck living somewhere if they decide that life events or a desire is calling them to move someplace new within the State of California.