EVERYTHING YOU NEED TO KNOW ABOUT PROP19 TAX BREAK
If you're a California homeowner over 55, severely disabled, or a victim of a wildfire or natural disaster, Prop 19 could save you thousands of dollars a year in property taxes when you move. This is one of the most impactful tax benefits available to homeowners in the state, and it's something I discuss with many of my clients in Los Angeles who are thinking about downsizing, relocating, or buying a replacement home. Here's how it works, with real examples.
Prop 19 allows eligible homeowners to transfer the taxable value of their primary residence to a replacement primary residence anywhere in California, regardless of location or value, as long as the replacement residence is purchased or newly constructed within two years of the sale of the original primary residence. Homeowners can save big on their annual property tax bills, whether they move to a replacement home that is the same price, more expensive, or less expensive than their original home.
WHO QUALIFIES?
Eligible homeowners who qualify for a Prop 19 tax base transfer include:
Homeowners - ages 55 and over
Severely disabled homeowners
Victims of wildfires or natural disasters
BIG TAX SAVINGS FOR HOMEOWNERS MOVING WITH A PROP 19 TAX BASE TRANSFER
A 55-year-old couple purchased their home 30 years ago for $110,000. The taxable value of their home is now $200,000 (the $110,000 tax base value increased 2% each year for 30 years). Their annual property tax bill is $2,200 (1.1% multiplied by the taxable base). Under Prop 19, the couple can sell their home for $600,000 and transfer the property tax base of their original home to a replacement home anywhere in California, up to three times.
Example #1: Buying an Equal or Less Expensive Home:
If the couple sells their home for $600,000 and buys a replacement home for the same amount or less, the couple could transfer the lower tax base of their original home to the replacement home and save $4,400 on their annual property tax bill. By transferring the original home’s tax base ($200,000) to their replacement home, the couple would pay the same amount in property taxes ($2,200) after moving – instead of paying $6,600 on the replacement home’s purchase price of $600,000.
Example #2 Buying a More Expensive Home:
If the couple sells their home for $600,000 and buys a more expensive home for $700,000, they could transfer the property tax base of their original home to the replacement home and save $4,400 on their annual property tax bill. Instead of paying $7,700 in taxes on the $700,000 purchase price of the replacement home, the couple would pay $3,300 because the new tax bill would be calculated by adding the original home’s tax base ($200,000) to the difference between the purchase price of the replacement home ($700,000) and the sales price of the original home ($600,000).
3 WAYS TO LEARN MORE ABOUT PROP 19:
1 - Ask your local REALTOR®
2 - Check your County Assessor’s website
3 - Click here to see a sample Prop 19 transfer form
How Prop 19 Applies to Los Angeles Homeowners
In a market like Los Angeles, where property values have appreciated significantly over the decades, Prop 19 can be especially powerful. Many long-time homeowners in neighborhoods like Santa Monica, Brentwood, Venice, and the Westside purchased their homes years ago at much lower values. Without Prop 19, selling and buying a new home would mean a dramatic increase in property taxes based on the new purchase price. With Prop 19, eligible homeowners can carry their existing tax base forward — potentially saving tens of thousands of dollars over the life of the new home.
This is especially relevant for homeowners who want to downsize but stay in the Los Angeles area, or for those affected by recent wildfire events who are looking to rebuild or relocate within California.
If you're curious about how Prop 19 might apply to your situation, I'm happy to walk you through the details. While I'm not a tax advisor, I work closely with clients and their tax professionals to make sure the financial picture is clear before making a move.
Linda Benaddi | Los Angeles Real Estate Agent (310) 691-9982 | lindarealestatela@gmail.com
Related reading: Four Ways to Build Equity in Your Home Faster | Seller Tips: Protect Your Home's Resale Value
