You might think Proposition 19, which went into effect April 2nd, has little or no impact on you. That may not be the case. If you are over 55, Proposition 19 provides new opportunities that can save you a lot of money. Prop 19 allows you to move your older (lower) property tax to your new home – instead of having your property tax increase. This can lead to tens of thousands of dollars of savings each year.
Before Prop 19, the previous rules required that you buy a home for an equal or lower price than what you sold your house for. However, the new rules allow you to move up in value not just down. When you sell your old home, you can transfer your old, lower, property taxes to your new, possibly more expensive, home.
Some of the Highlights
- You can transfer your property tax anywhere in the state.
- You can move to a more expensive home; there is a formula for keeping your tax savings intact.
- You are allowed to make a property tax transfer 3 times during your life, instead of only once.
- There are new restrictions when you transfer your home to your children or grandchildren.
Specifics to Know About
- Moving to a more expensive home triggers a partial step up in basis. For example: Say your original purchase price was $1M and you sell it for $4.5M. Then you stepped up to a new home purchase price for $5.2M. Instead of $52,000 tax per year, you would pay only $17,000 per year. You’d save $35,000 per year on your property taxes!
- If the home is deeded to a child or grandchild, they must occupy the home as their primary residence. There is a partial step up in taxation if the property has gone up in value more than one million dollars since the original purchase.
Montecito Market Report
Now May Be the Time to Put Prop 19 to Use
If you are over 55 and are contemplating a move within California, I will help you find out if you can make use of this powerful tool to save on your property taxes. To discuss how much you can save and how it will work, please give me call.
Client Talk…
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