Proposition 19: Transfer Your Tax Base When Selling Your Home FAQ
Marin County | California Real Estate
Proposition 19 Will Benefit Marin County and California Homeowners When They Sell Their Homes
On November 3rd, California voters approved Proposition 19, a measure designed to give homeowners more freedom to change residences while closing tax loopholes on inherited properties. The measure, set to go into effect in early 2021, has two distinct parts, the first of which allows homeowners who are 55 or older, disabled, or lost their home in a natural disaster to transfer their tax base to a new home up to three times anywhere in California.
Previously, homeowners could only take advantage of a tax base transfer once in their lifetime, and only if they bought a replacement home in certain California counties. This was via Propositions 60 & 90, which have been superseded by Proposition 19.
The second part outlines the requirements for retaining tax basis in family transfers, which is now limited to transferring a primary residence to a child or grandchild for continued use as a primary residence.
Proposition 19 Frequently Asked Questions
Whom does Proposition 19 affect?
The new law has long-lasting implications for homeowners, inheritors, firefighters, and local governments. Homeowners benefit from the ability to transfer their tax base and move into a new home, while inheritors are subject to more limitations on properties they receive from parents and grandparents. The California State Controller is required to deposit 75 percent of the calculated revenue to the Fire Response Fund and 15 percent to the County Revenue Protection Fund.
What does Proposition 19 mean for Marin County homeowners?
Marin County and California homeowners can transfer the tax basis of a sold primary residence to a replacement primary residence up to three times. These transfers are unlimited for those whose homes were destroyed or substantially damaged by fire. If the replacement home is of equal or lesser value, the tax base remains the same. The sale of the original home must happen within two years of buying the replacement residence, and homeowners can purchase their new residence before their current residence sells.
What if the replacement home is more expensive than the sold home?
If the replacement home is of greater value, the new tase base follows this formula:
[value of new home – value of old home] + [old tax base] = [new tax base]
If a homeowner with a tax assessment of $300,000 on their house sells for $900,000, then moves to a home worth $1.3 million, their new tax base is $400,000 (the difference in value) plus the original home’s $300,000 tax assessment. The new home retains a tax basis of $700,000.
What does Proposition 19 mean for inheritors?
Inheritors who receive a primary residence from a parent or grandparent will be able to retain the same tax base so long as the property continues to be used as a primary residence. Even in this case, the residence is subject to some upward adjustments if the new property value is more than $1M over the original tax basis. Family farms are exempt from these restrictions.
When do these changes take place?
Beginning April 1, 2021, Proposition 19 applies to the transfer of one’s tax basis anywhere in the State of California regardless of value.
Beginning February 16, 2021, the family transfer rules take effect.
How does this affect purchases and sales made before April 1, 2021?
A message from the California Association of Realtors on the matter reads:
“Although we believe that the tax benefits under Proposition 19 apply to transactions where either the sale or purchase of a primary residence takes place before April 1, 2021, as long as the subsequent sale or purchase takes place within two years and on or after April 1, 2021, others have taken the position that both the sale and purchase must occur on or after April 1st, 2021. C.A.R. will seek official clarification of this issue.”
Whether it is buying or selling a property, I always encourage seeking the advice of a qualified California real estate attorney or tax advisor for personalized guidance.
The full text of Proposition 19 is available online at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200ACA11
Thinking of buying or selling a home in Marin County / the greater SF Bay Area? Learn more about me here, or call me at 415-847-5584. I am always happy to discuss your short-term and long-term real estate goals.
Proposition 19 Scenarios / Comparisons to Current Tax Law
The California State Board of Equalization has compiled some example comparisons for your reference:
PROP 19: PARENT-CHILD & GRANDPARENT-GRANDCHILD EXCLUSION
PROP 19: BASE YEAR VALUE TRANSFER – PERSONS AT LEAST AGE 55/DISABLED
PROP 19: BASE YEAR VALUE TRANSFER – INTRACOUNTY DISASTER RELIEF
PROP 19: BASE YEAR VALUE TRANSFER – INTERCOUNTY DISASTER RELIEF
Proposition 19 in Marin County: A Final Reminder
Whether it is buying or selling a property, I always encourage seeking the advice of a qualified California real estate attorney or tax advisor for personalized guidance.
The full text of Proposition 19 is available online at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200ACA11
Thinking of buying or selling a home in Marin County / the greater SF Bay Area? Learn more about me here, or call me at 415-847-5584. I am always happy to discuss your short-term and long-term real estate goals.
About the Author
Thomas Henthorne is consistently top-ranked, award-winning real estate agent in Marin, helping people buy and sell homes for almost a decade. He writes the #1 real estate blog in Marin County and is a frequent speaker on panels at industry gatherings.
He may be reached at 415-847-5584.
Thank you Thomas… I found this proposition really confusing and this helps.
Glad it helped! I will publish more information in my blog as it becomes available. Thanks, Thomas
Hi I lost my home in wildfire 2020. I sold the property in Feb 2021. My question is I have bought another home but it will not close before 4/1/21. The effective date for the prop 19 tax base transfer. I am 55 and want to know if it matters that the new place closes before 4/1/21. Does that make me not eligible because buying the new place didn’t happen after 4/1/21. It’s about a week short. Can I still use the prop 19 transfer tax base or did I need to extend closing escrow till after 4/1/21? Thanks for your reply.
Cathy Brusseau
Hi Cathy, it sounds like you are working with a real estate agent on your deal. I would suggest you ask him/her to advise you on this question. It would not be appropriate for me to get involved. So sorry about the loss of your home and I am happy you have found another home. Very best, Thomas
Thanks Tom, I’ll definitely be giving you a call for a consult down the road… I’ll be 55 in a couple years and wants to move from San Mateo County where my assessment is $880,000 on a $2 million house. I’m Looking at Placer County at $1.5 million house… Am I doing the math right? Does this looks like a positive move?
Sean
Hi Sean, sorry I am just seeing this now. Call or text me anytime and let’s plan that next move. Best, Thomas
Thomas, my wife and I are thinking of selling our single family residence to move into a retirement community or condo. In many of these retirement communities you don’t own the actual structure or land; you purchase the right to live in the structure at market value and I assume pay taxes accordingly. Does Prop 19 allow us to transfer our SF home tax basis in this situation? I have written the state tax folks, but no reply.
Hi Tom, I would suggest you consult with your tax advisor on this as I do not know the answer to your question. Ideally your county tax office should be able to answer this question so I would start there vs. the state board of equalization, and if you can visit in person all the better. My friend KC is in an over-55 manufactured community and she owns the home but not the land (she pays rent) and is taxed on the value of the home only. It does seem like Prop 19 would apply in this case. Here’s an article from Riverside County you may want to consult: https://www.countytreasurer.org/TaxCollector/PropertyTaxFrequentlyAskedQuestions/MobileHomePropertyTaxesFAQ.aspx#:~:text=Mobilehomes%20in%20California%20are%20taxed,property%20taxes)%20to%20the%20State.
If you don’t own the structure OR the land, then I do not think Prop 19 would apply, but again I would consult with your county tax office.
When it comes time to sell your home in San Francisco I would be delighted to speak with you.
Best, Thomas
I already sold my home with 60 year old tax base in August 2023. I am searching for a home in Sonoma County but can’t find much in my price range. Do I have one year in which I can transfer my tax base? Or two years? At an open house this weekend, the agent told me I only had 6 months! I have no tax professional to ask. I am a retired 70 year old and the house I sold was my family home. It sold for 830,000 but of course I took away much less after all the agents and fees got thru with me. I am very worried I will lose my Prop 19 benefit. Thank you. Buck
Hi Buck, according to this article you have two years from the sale, but I would check with my tax advisor and your new real estate agent, as well as the California State Board of Equalization. Here is the FAQ which mentions the two years:
https://www.boe.ca.gov/prop19/#FAQs
* I do not provide tax advice so you must consult with a tax advisor for any tax-related questions.
Hello and thank you for this informative post. My wife and I live in San Francisco, in a house we share with her sister. She and her sister jointly inherited it from their mother. It is the primary residence for the three of us. If we were to sell this house, and each buy our own separate homes with the proceeds, would the tax base move with us to our new homes?
Hi Anthony, I’ll reach out to you directly via email. Best, Thomas