Proposition 19 Impact on 55+ Homeowners
Proposition 19 makes it easier for older homeowners to transfer their current property tax to a replacement home. We are excited because this removes a huge barrier for our “senior” clients who want a home better suited to their current lifestyle. This helps to lubricate the housing log jam by adding much-needed inventory in high demand areas.
California 55+ homeowners have enjoyed Proposition 60/90 – it gives limited rights to transfer current property tax rate to a replacement property. Proposition 19 expands that right, but it also closes a huge inherited property tax loop hole that many saw as unfair.
Proposition 19 Increases How Many Times You Can Transfer Your Property Tax
If you are a 55+ homeowner, Propositions 60 and 90 allowed you to transfer your current property tax rate to a replacement home one time. If your spouse or partner had used this privilege before, you are out of luck.
Bonus Read: All About Proposition 60/90
With Proposition 19 your world expands to 3 transfers in a homeowner’s lifetime. This is huge because the lifestyle of a 55+ homeowner will likely change a few times before the “final” home. Seniors won’t hesitate to sell their current homes now if they know they can take their tax rate through a couple more lifestyle adjustments!
Move Anywhere In California
There were a lot of people who couldn’t use Proposition 60/90 to sell their Glendale home and move closer to grandkids or downsize into a beach condo because only none counties cooperated with the transfer.
If Proposition 19 passes senior homeowners can move anywhere in the state if California. This is huge because senior homeowners may be able to free up home equity by moving to a less expensive area. These areas, in turn, could see an economic boast from the new influx of residents.
Bonus Read: Move to Palm Springs
Property Tax Transfers For Downsizers AND Upsizers
The original idea of Proposition 60/90 was to help 55+ homeowners downsize into a smaller, less expensive home. But it was also intended to free up much-needed housing inventory. Grandma and Grandpa Kent sell their 4 bedroom home and move to a 55+ community. Biff and Buffy finally get a home big enough for their family of 5, and Jack and McKenna buy the sweet starter cottage of their dreams.
Nothing happens if the Kents stay put until they die, right?
But 55+ year old homeowners aren’t really old. They may not need the 4 bedroom mansion anymore, but the luxury condo they crave is MORE expensive, not less. Or, they no longer need the top-rated school district, but that beachside cottage is not cheap.
Bonus Read: Good Advice for Downsizers, Good Advice for Upsizers
In the old world of Proposition 60/90 our hip and happening 55+ homeowners are out of luck. They could only transfer their property tax rate if the replacement property was LESS expensive than the current home. And, a lot of my clients were not able to take advantage and decided not to sell!
Proposition 19 removes this barrier by allowing them to buy a more expensive home and transfer their current property tax rate with an upward adjustment. (I wasn’t able to find understandable information on the specifics of “upward adjustment” just yet, but I assume it is still better than paying a rate based on current market value.)
Now is an excellent time to remind you that while I have helped dozens of 55+ homeowners downsize under Proposition 60/90, I am not a tax expert and you should consult your expert of choice for your specific tax situation.
Bonus Read: How To Downsize Your House
Closing An Inherited Property Tax Loophole
It used to be that if you inherited a property you also inherited the property tax rate. The thought was a family should not be forced to sell a family home and leave the community due to a big tax reassessment.
The problem is that some families were using the inherited property as an income-producing investment property.
The loophole is closed with Proposition 19. If you inherit a home and use it as your primary residence you get to keep the original tax rate. If, however, you use it as a second home or rental property the home is reassessed at market value.
Does Proposition 19 Open Future Doors For You?
Your wheels might be turning right now. Is there a place you’d like to move to, now that you can transfer your property tax rate?
I am a good listener. Let me know if you just want to bounce some ideas around. I promise to leave the sales hat in the drawer.