California Prop 19: Transferring Your Property Tax Basis + Saving Money
Prop 19 is designed to make it more affordable for homeowners aged 55 and older who wish to sell their primary residence and move to another home within the state of California by allowing them to transfer their existing property tax basis.
Your tax basis is based on the assessed value of your existing home which is also referred to as the factored base year value (FBYV). Your assessed value is what is being transferred to your new property. This amount is then increased by no more than 2% each year.
Who can take advantage of Prop 19 in the state of California?
- Homeowners 55 years or older (one or both spouses)
- Severely disabled individuals
- Victims of wildfires and natural disasters
Unlike previous tax laws, Prop 19 covers the entire state and allows a homeowner to sell in one California county and buy in another, or the same! But it is important to note that Prop 19 only applies to primary residences and does not extend to investment properties.
The Two Year Gap
Whether you are buying or selling, the order doesn’t particularly matter when taking advantage of Prop 19. But there is a very important two-year gap that you need to be aware of. You only have two years from the time of your home sale to transfer your existing tax basis to your new home. The same goes for a home purchase. You can buy a home first but you must sell your original primary residence within two years to make the tax basis transfer.
The bill went into effect on April 1, 2021. But what happens if you sold or bought a home before that date?
As long as you are transitioning into your next primary residence, so either buying or selling your property after April 1, 2021, Prop 19 still applies. But don’t forget that two-year window!
- You can utilize Prop 19 up to three times
- There is no limit on the purchase price of your new home
- If your new home’s sale price is equal to or less than your previous home’s sale price then your tax basis is directly transferred.
- If the purchase price is higher than your previous home’s sale price then you will need to calculate a new property tax basis based on the value of your new property. Which still offers huge savings!
If you would like to learn more about taking advantage of Prop 19 don’t hesitate to contact us.
We also found a lot of great Prop 19 info on the California’s State Board of Equalization website. Click HERE
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Torben Yjord-Jackson – Realtor
EXP Realty of CA, Inc.
License # 02050831