Proposition 19 passed by a slim majority in the November 2020 election. It was one of the most complicated Propositions on the ballot because it was actually two measures within one. The first part affects property owners over 55 and the second part affects the heirs to property owners. I am only going to review the first part.
Changes to Propositions 60 and 90
Propositions 60/90 allowed homeowners over 55 to sell their primary residence one time, buy a second home of equal or less value within just a few participating counties and carry their existing tax base with them on a purchase.
Proposition 19 is still for homeowners over 55 but now includes people who are disabled and people affected by disaster. Homeowners can now buy anywhere in the state and they can use this proposition up to three times. The new home purchase can be of greater value with the following tax discount; the homeowners tax base would remain the same up to the sale price of original home and any difference between the sold home and the purchased home would be taxed at 1%. The currently tax rate for homes purchased in Long Beach is 1.17% of purchase price.
A Proposition Purchase Scenario
A couple purchased a home in 1997 for $200,000 and their taxes were around $2,000 per year. Today with the 1% cap on reassessment their yearly taxes are $3,000. Their home is currently valued at $700,000. The couple have decided to move closed to the beach and are looking to purchase something around $1M. What will their new tax bill look like? The first $700,000 would retain the $3,000 per year assessment. The $300,000 difference between sale price and purchase price would be taxed at 1%, therefore they would pay an additional $3,000 for a total of $6,000 annual tax fee. Had they purchase the higher priced property under the old rules their taxes would be $1M times 1.17% or $11,700, therefore the Proposition 19 saved them a total of $5,700 per year in property taxes.
Details and Decisions
All the above is hypothetical until it truly becomes part of the tax code, and the devil is always in the details. Supposedly this will come to pass by April 2021. Of course you should always talk to your tax and estate planning professional before making any decisions.
Getting top-dollar is important
My expertise is getting you top-dollar once you do decide to sell and buy using this Proposition 19. It is important that every step has been taken to realize the highest offer because the higher your sell price the less taxes on the purchase!
Thinking of Selling?
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!
Michele “K” Kreinheder – Hardest Working Realtor in Long Beach