A lot of Cypress homeowners are asking us about keeping their current low property tax rate if they sell their home and purchase a replacement home. Actually, thousands of home sellers in Southern California are selling their primary home and transferring their lower property tax base under Proposition 19 that went into effect in 2021.
Before this property tax benefit became available in 2021, homeowners only had access to a one-time property tax transfer – and their replacement home needed to be of equal or lower value than the home they were selling. Now owners can receive the property tax discount even when buying up in price – and the property tax transfer can be used multiple times.
To take advantage of the Prop. 19 property tax transfer, you must file for the tax exemption in the first year of a new purchase – it’s not automatic.
If you are buying down in value, then your home’s base year value may be transferred to your replacement home without any value adjustment.
Prop. 19 offers additional flexibility. You have the option to buy your replacement home first, and then sell your primary residence. Or, you can sell your primary residence first, and then buy your replacement home. Both transactions just need to be completed within two-years to receive the property tax discount.
Example: A homeowner sells their Cypress home for $1 million with a property tax base of $500,000. Within the first year of the sale, the former Cypress resident buys an Irvine home for $2 million.
If the replacement home is purchased within 1 year, the candidate for this property tax benefit receives an additional 5% added to the value of their sale property. Here is the math: $1,000,000 x 105% = $1,050,000
The value of the replacement home in this example is $2 million, minus the adjusted value of the original home, $1,050,000. The difference between the two homes is $950,000. Now add the $950,000 difference to the sold home’s base value of $500,000. Your new property tax base is $1,450,000 – Much lower than the property tax for a $2 million purchase price. In this case, Prop. 19 saves the owner $5,500 per year in property tax.
And there is an additional benefit. For homeowners over 55 that take advantage of the property tax transfer – Even if they move out of the home later – that property continues to receive the lower tax rate as long as they remain the owners.
The California State Board of Equalization provides more information at BoE.Ca.Gov/Prop19. And you can also contact your county assessor’s office to clarify any questions.
If you are considering taking advantage of transferring your property tax base to your new home, give us a call. We can share more information to help you make the best decision for your move.
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We currently have buyers looking to purchase a Cypress home from $800,000 to $1.7 million.
Call Cary direct at 800-944-2441 or email: Cary@Cary4Homes.com. We can review your best options to insure you receive the most profit when selling.
The call – just like our concierge loan service – costs you nothing. And of course our conversations are always confidential. Let’s talk soon.