Understanding California Prop 19: A Guide for Seniors Aged 55 and Older

Introduction to California Prop 19

California Proposition 19 was passed in November 2020 and brought substantial changes to property tax laws in the state. For seniors aged 55 and older, Prop 19 offers unique benefits, particularly when it comes to transferring property tax assessments. This legislation aims to provide financial relief and flexibility for older adults looking to buy and sell their homes.

Key Features of Proposition 19

One of the most significant advantages of California Prop 19 for seniors is the ability to transfer their property tax base from their existing home to a new residence. Previously, seniors could only do this under specific conditions and within narrower parameters. However, Prop 19 broadens the criteria significantly.

Now, seniors aged 55 and older can transfer their property tax assessment to a new home, regardless of location within California. This feature provides an opportunity for seniors to downsize or relocate without facing a substantial property tax increase, which can be a major concern when moving to a new area.

Additional Benefits for Seniors

Besides expanding options for transferring property taxes, California Prop 19 introduces provisions for inherited property. Under the new law, if seniors inherit a primary residence, they can retain the property tax assessment, provided they plan to use it as their primary home.

However, the law does stipulate that if the property is not utilized as a primary residence, the tax reassessment will occur, which could lead to a significantly higher property tax bill for subsequent owners. Therefore, it is crucial for seniors to be well-informed about these changes to take full advantage of the new regulations.

The Process

The transfer must be done within two years of the sale of the primary residence and the adjustment claim form BOE–19–PB must be filled out with the county assessor where the new property is located within three years of the date of replacement. This benefit is available up to three times during your lifetime.

The base year value of the existing residential property may be transferred to a home of equal or lesser value. If the value of the replacement home is greater than the tax base of the old home. The difference will be added to the transfer base value.

Example

Example 1: if the market value of the replacement is less than or equal to the market value of the original, then the taxable value (factored base year value plus inflation adjustment) of the original will transferred to the replacement residence with no adjustment.

Since the market value of the replacement is $200,000 less than the original market value, the taxable value transferred to the replacement will remain at $300,000.

Example 2: The market value of the replacement is more than the market value of the original, then the difference will be added to the transferred value. (This assumes the replacement property is purchased before the original. If the replacement property is purchased after the original, depending on the time period when the replacement was purchased, the amount above 5% or 10% over the original property market value is added to the transfer base year value).

Since the replacement market value is $100,000 more than the original, the difference in the market value is added to the transferred value. Therefore, the taxable value of the replacement will be $400,000 ($300,000 +$100,000).

Summary

California Prop 19 represents a pivotal shift in property tax law that greatly benefits seniors aged 55 and older. By providing them with enhanced opportunities to transfer their tax bases and protecting inherited properties, the proposition empowers older adults to make informed decisions about their real estate options.

As seniors consider their next steps, it remains essential to consult with real estate professional about the value of your home and tax professionals about capital gain to fully understand how best to leverage these changes for their financial advantage. In summary, California Prop 19 opens doors for seniors, ensuring they can enjoy their later years with less financial worry related to property taxes.