If You're Over 55, Here's the Tax Rule you NEED to Know Before You Downsize (or even upsize!)

One interesting side effect of Prop 13 (which limits the amount that the state of CA can raise your property taxes every year) is that it makes the following scenario very common: 

Let's say Angela and Brad bought a Marin rancher in 1985 for $185,000 that's now worth $2.2M. They're ready to move to a condo in the city, but they're worried about their property taxes. 

Why?

Thanks to Prop 13, their current property taxes are about $3600/year or $300/month. If they sell and downsize to a $1.5M condo? Without an exemption, property taxes on that condo would be about $18,000/year or $1,500/month. 

You see the issue.

And the issue isn't just for the homeowners wanting to downsize. Homeowners feeling stuck in place means fewer homes getting put back into the inventory for new buyers to pick up. (And lord knows our inventory is compressed enough as it is!)

This is where Prop 19 comes in. 

Qualified homeowners can actually pack up that sweet vintage property tax bill… and take it with them when they move. 

How Does it Work? ** 

• You must be 55 or older, severely disabled, or victim of a natural disaster

• Both exiting home and new home must be primary residences

• Purchase of the new home must be within 2 years of the sale of the old home (you can also buy and then sell but you'll have some extra taxes to pay)

• The exemption is filed after you have completed both the sale and purchase and are living in the new home

• You can now apply this anywhere in the state (!) not just select counties

• You can now receive some benefit even if the new property's value is higher than the old one! (there's some math - check with your CPA)

Even if you didn't buy 30+ years ago when homes cost less than a G-wagon does today, you can see how this might be useful. 

Let's say you're living in a Noe Valley home you bought 10 years ago that's now appreciated to around $4M, and you'd like to take that money and buy a beach house in Marina del Rey. (this sweet pad, for example) You can still probably expect to save quite a bit by applying this tax transfer. 

So: Now that you know where to start, please reach out if you're thinking of making a move. We can help fill in SO many more of the blanks for you. Like what your current home is worth, what the sales process is like, and what costs and options are like wherever you're headed next. 

Moving out of the Bay? We've got you! Our network is extensive. We can get you to the best agent to help score your dream home in your new area. 

**We are not tax professionals and this is not intended as tax advice. It is essential that you seek the advice of a tax expert to verify eligibility and logistics of all applicable tax laws to your individual circumstances.