Age 55 + Replacement Dwelling Benefit

Age 55 + Replacement Dwelling Benefit in California = Big SAVINGS on TAXES!

Are you or your spouse, age 55+ and planning to sell your California home and purchase a replacement home in California? Read on to discover big tax savings.

As of April 2021, the old California Prop 60/90 was replaced by a greatly enhanced version of the replacement dwelling benefit, which is called Prop 19. What is Proposition 19 in California? Proposition 19 allows persons who are 55 years of age or older or severely disabled to transfer the base year value of their principal residence anywhere in California within 2 years of the sale of the original property.

The number of times a tax assessment can be transferred is up to 3 times (disaster and contamination victims are allowed up to 1 transfer).

Whether you are buying up or downsizing, Prop 19 can provide great savings for you on your property taxes. The longer you have lived in your current home, the greater your property tax savings will be. The replacement primary residence must be purchased within two years of the sale of the original primary residence – either before or after the sale.

You can carry over the tax value of your current primary residence into a new primary residence, whether the new primary residence is less than, equal to, or greater than the value of the primary residence you sold.

However, if the new property costs more than the sale price of the old property, your tax value will be increased by the difference between the sale price of your old property and the purchase price of your new property.

Example:  Your current Primary Residence has a tax value of $500,000. You sell it for $1.0mm.

Within 2 years of selling, you purchase a new Primary Residence for $1.2mm.

Your new tax value is $500,000 plus $200,000 = $700,000.

If the newly purchased property is purchased at a price equal to or less than the sold property, the owner is entitled to a tax value equal to the lesser of (i) the carried tax value of the sold property or (ii) the purchase price of the new property.

In a divorce situation, the first spouse to move out of the home is the one who qualifies for the full tax base transfer (assuming the home gets sold).

Additional details are available on the Los Angeles County Assessor's Website.

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