Proposition 19, Who Qualifies, How the Tax Basis Transfer Works, and How to Avoid Surprises

Proposition 19, Who Qualifies, How the Tax Basis Transfer Works, and How to Avoid Surprises

(Video Link Below)

A homeowner called me and said, “Dar, I’m downsizing, but I’m terrified my property taxes will jump.”

That fear is real in California. The good news is Proposition 19 can save you a significant amount of money, but only if you understand the rules. If it is handled incorrectly, you can end up with higher taxes instead of lower taxes.

Here is the simple version.

Proposition 19, passed in 2020, lets certain homeowners transfer their property tax assessed value, your tax basis for property taxes, from one home to another. It is a California only rule, and if you qualify, it can apply in any county in California.

This matters because of Proposition 13. Many longtime homeowners have an assessed value that is much lower than today’s market value. So when you move, your property taxes can change dramatically. Proposition 19 is one of the few tools that can reduce that shock.

So who qualifies. At a high level, Proposition 19 can apply if you are 55 or older, severely and permanently disabled, or impacted by certain wildfire or disaster situations. And here is something most people do not know. For the 55 plus and disability categories, you can generally use it up to three times.

Now here is the mistake that creates the biggest surprise. People say, “I am transferring my taxes.” That is not exactly accurate. You are transferring your assessed value for the base property tax calculation, but your total bill can include special assessments.

That is why Mello Roos matters. In many cases, Mello Roos and other assessments do not transfer the way your assessed value does. So if your current home has no Mello Roos and your replacement home does, your total tax bill may be higher than you expected, even if you did the transfer correctly.

Here is the first practical step before you do anything. Pull your most recent property tax bill and separate it into two parts, base property tax and special assessments. That one step prevents a lot of mistakes.

One more important rule, timing. There is generally a two year window requirement, meaning the sale of your original home and the purchase of the replacement home typically need to happen within two years of each other. There are also filing steps and other restrictions, so this is not something you want to guess on.

If you are downsizing, Proposition 19 can be a huge advantage, but you need to understand who qualifies, what transfers, what does not transfer like Mello Roos, and the timing window.

I’m Dar, REALTOR® and CPA, and if you want help planning your downsizing numbers, you can book an appointment here.
https://vidargroupre.com/book-appointment