By SARAH WARD
I wanted to talk about Prop 19, the voter initiative that passed in November. Prop 19 transfers the existing tax basis of a primary residence to a new residence for people 55 and older, those with certain disabilities, and for owners of primary residences destroyed by wildfire. Prior to Prop 19, there were other options for transferring a property basis but not all counties participated and those options were narrower and more limiting. Prop 19 went into effect last month and it is now in effect statewide.
The issue was that tens of thousands of homeowners have a fairly low property basis and that was homeowners’ sole reason for holding property and not selling. Right in my own neighborhood, when I study the property tax record, there are quite a few homes where the owner purchased the property for under $100,000 and (based on the original Prop 13) their property taxes have stayed fairly low based on the original cost plus a small inflation adjustment. Many older homeowners are paying under $2,000 a year in property taxes. I have even seen property taxes under $1,000 per year for these types of homeowners.
Often these homeowners wish to move out of a larger family home with perhaps four or five bedrooms to avoid the upkeep and maintenance and move into a smaller home or condo sometimes closer to their children or other family. But for the many older homeowners living on a fixed income, moving would significantly increase their property taxes. For example, if homeowners sold their property for $700,000 and purchased a smaller replacement property for $600,000, their property taxes would increase by around $4,000 a year. So these types have homeowners have stayed put. Now you have two people living on a quarter acre with 4 or 5 bedrooms who don’t necessarily want to live there when growing families are desperate to live in such a property. And so this part of the market remained frozen. This was the idea behind Prop 19. This type of homeowner can now easily transfer over their existing basis to their new property and continue paying their lower property tax.
If a homeowner purchases a replacement property for greater than the sale price of their old property, they still are entitled to an excellent reduction of property taxes via a blended rate. The paperwork is available typically through the County Assessors office in the county of the new property. I am not a tax attorney so full disclaimer to seek professional advice prior to selling, but I would be happy to have a chat about any further details you may be interested in; please feel free to reach out to me so I may listen to your unique situation and answer many of your questions. But the bottom line is that Prop 19 is now in force and it is something that quite a few older homeowners may want to consider to help them downsize and possibly move to a more desired area of California.
If you are thinking about buying or selling real estate in San Diego, give me a call for an initial consultation at 858-431-6043.
— Sarah Ward is a realtor with Fine & Coastal Real Estate. Reacher her at firstname.lastname@example.org.