The Greater Palm Springs area is a popular place for retirees. They love the nice weather, the golf courses, and the relaxing lifestyle. However, some might worry about property taxes when moving to the area. Fortunately, there's some good news in that regard.
Proposition 19 allows seniors to enjoy significant property tax savings and more flexibility when moving to a new home. This post will explain the tax savings in California that you may be eligible for under Prop 19.
Understanding Tax Savings in California Under Proposition 19
Prop 19 is a California law that voters approved in November 2020, effective April 1, 2021. It applies to seniors, people with disabilities, and natural disaster victims. The purpose is to keep their property taxes low when moving to a new home.
Previously, transfers were limited to the same county or specific counties, and the new home had to cost the same or less than the old one. Prop 19 simplifies this process.
Key Benefits for Senior Homeowners
- Statewide Transfers: Seniors can move anywhere within California and transfer their property tax base. That may allow them to relocate closer to family or medical care without increasing property taxes.
- Higher-Value Homes: If purchasing a more expensive home, seniors can still benefit from a partial tax base transfer. The original tax base is applied, with an upward adjustment based on the price difference.
- Multiple Transfers: Eligible homeowners can utilize this benefit up to three times, offering flexibility for future moves.
Practical Example
Let's say a senior couple has a home with an assessed value of $300,000. They sell it for $600,000 and buy a new one for $700,000. With Prop 19, they can transfer their $300,000 tax base to the new home. The additional $100,000 in value brings their new taxable amount to $400,000. That means they will save on property taxes compared to being taxed on the full $700,000.
Eligibility Criteria
To qualify for the tax base transfer under Prop 19, you must meet certain conditions:
- Age Requirement: At least one homeowner must be 55 or older when selling the original property.
- Primary Residence: The sold and replacement properties must be the homeowner's primary residence.
- Timing: The replacement home must be purchased or newly constructed within two years of selling the original property.
Application Process
To take advantage of this benefit, eligible homeowners should:​
- Sell the Original Residence: Complete the sale of your current primary residence.​
- Buy or Build the New Home: Acquire or build your new primary residence within two years.​
- File the Necessary Forms: Submit the claim forms to the county assessor's office for the replacement property. Include proof of age and documents for both property transactions.
Impact on the Housing Market
Prop 19 helps senior homeowners and impacts California's housing market. It lets seniors move without facing high tax increases, which encourages them to sell their homes. This increased movement can open up larger homes for young families and first-time buyers. It can help reduce housing shortages in some areas.
Considerations and Planning
While Prop 19 offers substantial benefits, seniors must carefully evaluate their circumstances. Consider the following points when planning to use Prop 19:
- Financial Assessment: Assess the financial impact of relocating, including moving costs, changes in living expenses, and property tax implications.
- Legal and Tax Advice: Consult real estate or tax experts to understand the benefits and limitations of your situation.
- Market Research: Investigate potential relocation areas to ensure they meet your lifestyle needs and budget.​
If you are over 55 and considering a move, consult a real estate expert or tax advisor about Prop 19. The rules can be complicated, but the potential savings are worth it.
Are you a senior looking for a home in Palm Springs? Reach out to Geoffrey Moore, your local Realtor®. Beyond finding the right home, he can also help you understand Greater Palm Springs property taxes.
Posted by Jim Cronin on
Leave A Comment