Prop 19 Explained | California Property Tax Transfer
If you're a subscriber to my YouTube channel or you've been watching me for long enough, you've probably seen me do a couple of videos on Proposition 19. Because it's such an important tool to so many of my clients, I want to do a quick refresher for you today.
Welcome to my YouTube channel. I'm Ryan Schramm, a realtor here in South Orange County. My channel is custom-tailored to be all about the lifestyle here. What's it like to live here? What's it like to buy or sell a house? What is the health of the housing market at this point in time? If you're interested in that or if you find value in that, please subscribe to my channel.
So let's rewind a little bit. Before Proposition 19, here's what you had.
Homeowners 55 years or older or severely or permanently disabled could apply to transfer their property tax base if they met four criteria:
1. You could transfer your tax base one time and one time only.
2, The home that you'd be switching the property tax base to (the replacement property), had to be in the same county, or it had to be in a county that reciprocates.
3. The new property had to be of equal or lesser value.
4. The new home had to be purchased within two years of selling the original primary residence.
With the implementation of Proposition 19, homeowners now have more wiggle room and flexibility to take their original primary residence tax base with them to a new home.
So what's happening under the new regulations for Proposition 19?
To be eligible, you must be 55 years of age or older, permanently or severely disabled, or a victim of wildfire or natural disaster. If you meet one of these criteria, you can transfer the property tax from your original primary residence to a replacement property under these guidelines:
1. The replacement property can be located anywhere in the state of California.
2. The transfer can take place regardless of value. So, for example, if the primary residence sold for $1,000,000 and you were only paying $4,000 a year for property taxes, you can now transfer that tax to a $2,000,000 residence and keep the $4,000 original tax base. Now, of course, you're going to have to pay extra tax on the difference between $1,000,000 and $2,000,000, but that's still a significant savings.
3. Both the sale of the primary residence and the purchase of the replacement property must be completed within two years.
4. Eligible homeowners can take advantage of this transfer up to three times.
Now, I've had several of my clients take advantage of transferring their property tax bases. It's an incredible tool, and here's what you need to know if you plan on doing this:
1. The setup for the transfer does not take place in the escrow. You need to have both the primary home sold and the replacement home purchased, then you're going to go ahead and file for the new property tax to be in effect.
2. You can find the property tax base transfer paperwork online, but it needs to be filed in the county where you purchased the replacement property.
3. If you're in the unique circumstance where you're going to purchase the replacement property before you sell the original primary residence, you can absolutely do that. You just need to sell the original primary residence within two years of purchasing the replacement home.
4. If you took advantage of Prop 60 or 90 in the past, as so many of my clients did, you still can go and utilize Proposition 19 up to three times.
5. There's no time limit on which you had to occupy the original primary residence. Check with your CPA on that to make sure that it is considered your primary residence, but so long as that is true, you can apply for the Proposition 19 transfer.
Proposition 19 allows for so much more flexibility and movement for people that were otherwise limited by living in a house with such a low property tax basis. If you wanted to move somewhere and you couldn't because of that lower tax, Proposition 19 has opened up other options.
I have to disclaim because there are complexities to this, it is very important to have a conversation with me and with your tax professional to make sure that you qualify before you set up a strategy to complete a Proposition 19 transfer.
Shoot me a text message if you have questions on this - (949) 620-6206. A lot of planning is involved, so it's important to reach out six months, 12 months, or even two years before you plan on doing this so we can put an effective strategy in place.
Here is the link to a great resource provided by the state summarizing everything we discussed, https://www.boe.ca.gov/prop19/.