Selling After 55 in California: How Prop 19 Lets You Keep Your Low Property Tax

Many long-time Orange County owners stay in a house that no longer fits because moving would reset their property tax to today's prices. Since April 1, 2021, Proposition 19 lets homeowners 55 and older take their low tax base with them to a new home anywhere in California. For the right seller it is worth thousands of dollars a year.

Why your property tax is low in the first place

Under Proposition 13, your home is assessed at what you paid for it, and that assessed value can rise at most 2% a year while you own it. If you bought in 1998, your assessed value may be a fraction of what the home would sell for. The base rate is 1% of assessed value, plus local bonds and assessments. Buy a new home the usual way and the new purchase price becomes your new assessed value.

What Prop 19 changes

If you qualify, the assessor transfers your old home's taxable value to the replacement home instead of reassessing it at the purchase price.

Who qualifies

• Homeowners 55 or older at the time the original home is sold.
• Homeowners who are severely and permanently disabled.
• Owners whose home was substantially damaged in a wildfire or natural disaster.

Both the home you sell and the one you buy must be your principal residence, the one that carries the homeowners' exemption.

Where

Anywhere in California. Before Prop 19, most counties would not accept a transfer from another county. Now you can sell in Irvine and buy in San Diego, Palm Desert, or back near family in Northern California.

How often

Up to three times in your lifetime if you qualify by age or disability.

When

You must buy or finish building the replacement home within two years of selling the original, either before or after the sale.

Bigger, smaller, or the same price

Same price or less. You keep your old taxable value. "Same or less" is measured against your sale price: 100% if you buy before you sell, up to 105% if you buy within the first year after, and up to 110% within the second year.

A more expensive home. You can still use Prop 19. The difference in value is added to your transferred base. You pay more tax than before, but far less than a full reassessment.

An example

A couple bought in Irvine decades ago. Their assessed value today is about $420,000. They sell for $1,600,000.

• They buy a $1,300,000 single-story home in Laguna Niguel. Their assessed value stays near $420,000, not $1,300,000.
• If instead they buy an $1,800,000 home, the difference in value is added, so their assessed value lands near $620,000, give or take a timing adjustment. Still a fraction of a full reassessment.

At a typical total rate of about 1.1%, keeping a $420,000 base instead of a $1,300,000 purchase price is a difference of roughly $9,700 a year, every year you own the home. Your actual rate depends on local bonds and any special assessments, such as Mello-Roos in newer communities.

How to claim it

1. Sell and buy within the two-year window.
2. File the claim form with the assessor in the county where the new home is. For owners 55 and older it is form BOE-19-B. Ask the assessor's office for the current version and deadline.
3. File soon after you close on the replacement. Late filings can cost you the tax savings for the years before you filed.

What trips people up

• Title. The person who meets the age requirement must be an owner of both homes. Trusts usually work, but confirm how title is held.
• Principal residence. A rental or second home does not qualify, on either end.
• Inheritance planning. Prop 19 also narrowed the old parent-to-child transfer rules. If you planned to leave the house to your children with its low tax base, talk to an estate planning attorney; the rules are different now.
• Capital gains. Prop 19 is about property tax, not income tax. The federal exclusion of up to $250,000 of gain, or $500,000 for married couples, is a separate question for your CPA.

This guide is general information, not tax or legal advice. Eligibility turns on details; confirm with your county assessor and your tax advisor before you sign.