Many homeowners in our community have lived in their homes for decades, enjoying a low property tax bill thanks to California’s Prop 13. But what happens when you want to downsize, move closer to family, or simply make a change? Many worry they’ll face a huge increase in property taxes if they buy a new home. That’s where Prop 19 comes in.
Prop 19 is a California law passed in 2021 that helps certain homeowners keep their low property tax base when moving to a new home. If you’re over age 55, have a severe disability, or are a victim of a natural disaster, you can transfer your current low property tax base when you sell your primary residence (not rental or investment property) and buy a new one — even if the new home costs more.
You Have Up To 2 Years:
You have up to two years to buy your replacement home after selling your original one, or you can even buy first & then sell, as long as the sale happens within those 2 years. Note: If you buy the new home first, you will pay the higher property taxes on it until you close escrow on your current home, at which point you can transfer your lower tax base.
Before Prop 19, you could only do this if your new home cost the same or less than your old home, and only in certain participating counties. Now, you can buy anywhere in California and spend more on your new home if you choose. Plus, you can do this up to 3 times in your lifetime (instead of just once, as before). This is great news for homeowners who want or need to move but don’t want to face a big jump in property taxes.
What is Prop 19?
A Simple Example:
Let’s say you bought your home in 1990 and today your property taxes are based on an assessed value of $250,000. If you sell it for $900,000 and buy a new home for $1 million, under Prop 19, you can transfer your old tax base ($250K) to the new home, plus the difference in price.
Here’s How It Works:
Your old assessed value: $250,000 New home purchase price: $1 million Sale price of old home: $900,000 Price difference: $1 million – $900,000 = $100,000
Your new assessed value would be $250,000 + $100,000 = $350,000 — instead of being taxed on the full $1 million value.
This can save you thousands in property taxes each year.
The “Not-So-Good” Side: Prop 19 also changed how property tax benefits are transferred to children or grandchildren. Before, you could pass your low tax base to your heirs on any property, including rentals.
Now, your heirs can only keep your low tax base if: * The property was your primary residence, and * They move in and make it their primary residence within one year.
Otherwise, the property will be reassessed at current market value, which can mean a big increase in property taxes.
Final Thoughts:
Prop 19 was designed to give older Californians more freedom to move without facing a big tax hit — but it also made it harder to keep family properties in the family at a low tax rate. If you’re thinking about selling and buying another home, or planning to pass down your property, it’s important to understand how Prop 19 might affect you.
If you would like to know how much your property is worth, or more information about moving your tax basis, I’m just a phone call away.
Call anytime! 714-717-5095