Proposition 19 can save homeowners over the age of 55 lots of money!
Property taxes in California are determined by market value or in most cases, sale price. The higher the price of the home the higher the yearly taxes. The tax multiplier varies from city to city. Long Beach uses a rate of 1.17% of the purchase price. For example, a home that sells for $500,000 would have a yearly tax base of $5,850.
History of Prop 13
Proposition 13, which was passed by California voters in 1978, with the intent of keeping real estate property taxes manageable for homeowners as they aged. The tax rate is calculated as one percent of the properties market value at the time of sale. The yearly increases, to account for inflation, can not be more than 2 percent each year. There may be additional property taxes for schools or local projects, which can vary amongst communities and bring the tax rate higher than one percent. Hence the reason why Long Beach may be higher or lower than surrounding communities.
I am going to use my own home as an example. We bought our house in 1997 for $159,000 (I know that is just crazy talk). Our only re-assessment came shortly after with an addition of a pool. Taking that and the limitation of just a 2% increase each year, my current taxes are approximately $3,500 each year.
History of Prop 60 (1986)
Prop 60 allowed homeowners, over the age of 55, to sell their home and take their low tax base with them. The new purchase had to be of equal or lesser value than the sale price of the original home. There were only a nice counties in California that participated. Homeowners could only take advantage of this tax savings program one time. Proposition 19 changed the rules!
What is Proposition 19?
Proposition 19 which was passed by voters in November 202 has two parts: a one concerned inheritance and the one we are discussing, a tax benefit for current owners.
TAX INCREASE – INHERITING PROPERTY
Under Proposition 19, a child may keep the lower property tax base of the parent(s) or grandparent(s) but ONLY if the property is the principal residence of the parent(s) and the child or children make it their principal residence within one year. This is huge difference from Prop 58 which ALLOWED the child to keep the low tax base on inherited investment property. Under Prop 19, the parents can only pass their low tax-rate along on their primary residence, and the child inheriting the home must take possession as their principal residence.
TAX BENEFIT – TRANSFER OF PROPERTY TAX BASE
Proposition 19 now allows homeowners to buy a more expensive home and still take their tax base with them*. They can now take advantage of this rule up to three times, as opposed to just once. All counties in California must participate. And the rule applies to not only homeowners over 55 years of age, but also disabled homeowners and homeowners who lost their homes to fires.
The LA County Assessor has provided an easy to understand “Base Year Value Transfer Calculation” form*. If your current property taxes are low, and you are thinking of selling and re-purchasing in California, you could definitely need to investigate this cost-savings Proposition. FULL DISCLOSURE: I am not a tax professional or a certified Financial Advisor, therefore I strongly urge you to contact the LA County Assessor directly and talk to your CPA and Financial advisor.
Call me directly at 562-243-2171 for a free consultation on your home’s market value. I can easily advise you on improvements to make (or not make) that bring you the best return on investment. Sign up for monthly Newsletter here!