One of the biggest concerns I hear from long-time California homeowners who are thinking about moving is property taxes. After years of owning a home, the thought of giving up a low assessed value can make moving feel much more expensive than it needs to be.
California’s Proposition 19 may help. It allows eligible homeowners to transfer the taxable value of their current primary residence to a replacement home anywhere in California—even if they’re moving to a different county.
Who qualifies?
You may qualify if, when you sell your current home, you are:
- Age 55 or older
- Severely and permanently disabled, regardless of age
- A homeowner whose principal residence was substantially damaged or destroyed by a qualifying wildfire or other natural disaster
Your current home must qualify as your principal residence, and your replacement home must become your principal residence as well. You must purchase or complete construction of the replacement home within two years before or after selling your original home.
Eligible homeowners age 55 or older, and those who qualify due to disability, can generally use this benefit up to three times. Different rules apply to disaster-related transfers.
How does the tax savings work?
Let’s say you bought your current home years ago for $500,000. Thanks to California’s Proposition 13 protections, its taxable value has grown gradually and is now $600,000, even though the home is worth considerably more.
You sell it for $1.5 million and buy another home in California.
Rather than automatically starting with a taxable value equal to the new home’s full purchase price, you may be able to transfer your existing taxable value to the replacement property. The assessor determines the applicable values, so the calculation isn’t always as simple as comparing the two sale prices, but regardless, the result could still be a substantial property tax savings compared with having the replacement home assessed at its full purchase price value.
How do you apply for the Prop 19 transfer?
The transfer isn’t automatic, and it isn’t handled through escrow. Once you’ve completed both transactions and moved into your replacement home, you will need to file a claim with the county assessor where your new home is located. The assessor’s website is the best place to start. You can find the appropriate form, review the filing requirements, and ask what documentation you’ll need.
A title or escrow company may be able to offer guidance, but don’t assume they’ll handle the application for you. Ultimately, it’s up to you to make sure the claim is filed.
One important thing to know if you’re getting a mortgage
Even if you qualify for a Prop 19 transfer, your lender may still need to qualify you using a higher property tax estimate. For planning purposes, I generally recommend budgeting around 1.25% of the purchase price in California, although the actual rate varies by location and can be higher.
That means your initial mortgage qualification and your eventual property tax bill may not be based on the same number. Once the county assessor processes your Prop 19 claim, your taxable value—and potentially your property tax bill—may be lower than the amount initially used to qualify for your mortgage.
If you’re thinking about selling your current home and buying another one in California, let’s talk before you make a move. Understanding both your potential property tax savings and the financing requirements can help you make a more informed decision about what you can comfortably afford.
