You have too big a house and want to downsize, but you love the low property tax you are paying now, and don’t want to pay the high property tax for a new house out there? Don’t worry. I have a solution for you. If you or your spouse is 55 years or older, you can take advantage of the Prop 19 to keep your current property tax amount for the new house you downsize to.  Here are some detailed criteria. But you can always call me for any questions you may have on this.

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How does Proposition 19 change the rules on tax basis portability?

Prop 19 allows a homeowner who is 55 years of age or older, severely disabled or whose home has been substantially damaged by wildfire or natural disaster to transfer the taxable value of their primary residence to: a) a replacement primary residence anywhere in the state, b) regardless of the value of the replacement primary residence (but with adjustments if replacement has a greater value), c) within two years of the sale and d) up to three times (or as often as needed for those whose houses were destroyed by fire).

 

What has changes compared to the prior rule - Prop 60/90?

The prior rule limited this exemption to a one-time transfer within the same county (Prop 60) or between certain counties (Prop 90) and only if the replacement property was of "equal or lesser value."

 

If the replacement property is of greater value, how is the new taxable value calculated?

The new taxable value is calculated by adding the difference between the full cash value of the replacement property and the original property to the original taxable value. For example, if a seller of an original property has a $300,000 taxable value and a full cash value of $1M and then buys a replacement property for $1.5M, the taxable value of the replacement property would be $800,000. 

 

How does Prop 19 affect the rules on intergenerational transfers to children or grandchildren? 

It limits the exemption to those properties where the primary residence continues to be used as a family home by the child or grandchild transferee. If so, the taxable value will remain the same, subject to some upward adjustments if the property value, at the time of transfer, is more than $1M over the original tax basis.

If the property is more than $1M over the original tax basis, what is the new taxable basis?

The new taxable basis will be the assessed value of the property at time of transfer minus $1M. ​

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