Did you know property owners in California who are age 55 and older can transfer the taxable values of homes they have sold to homes that are purchased or built to save money on property taxes?
In November 2020, California voters approved Proposition 19, which allows persons over 55 years of age to transfer the taxable values of principal residences to replacement principal residences located in any California county up to three times, provided certain requirements are met.
The benefit to taxpayers is that it prevents replacement homes from being reassessed at market value upon change of ownership, which is a requirement under law unless an exclusion applies. “Taxable value” means a property’s base year value plus inflationary adjustments, commonly referred to as the factored base year value.
Revenue and Taxation Code (R&TC) section 69.6 implements the base year value transfer provisions under Proposition 19 for persons over 55 years of age for transfers that occur on or after April 1, 2021.
For such transfers that occurred before April 1, 2021, see Publication 800-3a information sheet titled Transfer of Property Tax Base to Replacement Property – Age 55 and Older Occurring On or Before March 31, 2021. This base year value transfer is available to a person who is age 55 or older who sells a principal residence (referred to as the original property) and buys or builds a replacement residence (referred to as the replacement property).
Purchase of the replacement property must occur within two years of the sale of the original property.
Potential for Tax Savings
Property taxes are based on the assessed value of your property. For purposes of California property taxation, real property is reassessed at market value when sold or transferred, or upon completion of new construction. As a result of purchasing a different home or building a new one, the property’s assessed value can sometimes increase significantly, resulting in higher property taxes due each year.
If the original property’s factored base year value is less than the market value of the replacement property, then receiving a base year value transfer will result in savings.
To qualify for this exclusion, the following conditions must be met:
Claimant must be age 55 or older at the time the original property is sold.
Either the sale of the original home or the purchase or new construction of the replacement home, or both, must occur on or after April 1, 2021.
The claimant must own and reside in the original property at the time of sale or within two years of the purchase or new construction of the replacement property.
The original property must have been eligible for the homeowners’ or disabled veterans’ exemption, and the replacement property must be eligible for one of these exemptions.
The original property must be sold and the replacement property purchased for consideration. Consideration is defined as something of value such as payment of cash, creation or cancellation of debt, or exchange of other property.
Helpful Hints
The original property must be your principal residence at the time of sale or within two years of buying or completing construction on your replacement home. It cannot be a vacation home.
The replacement property can be purchased within two years (before or after) of the sale of the original property.
You must be at least age 55 when you sell your original property; but you can be under 55 when you purchase the replacement property.
If married, only one spouse needs to be at least age 55.
You can transfer your base year value up to three times under Proposition 19, regardless of whether you already received a base year value transfer prior to April 1, 2021, under Propositions 60 or 90.
If you buy a replacement property with a market value lower than that of the original property, any new construction completed on the replacement within two years of the sale of the original can be included in the transferred base year value, up to the amount of the original property’s market value.
You cannot benefit from this exclusion if you transfer your original property to your child and your child claims the parent-to-child exclusion.
If the market value of the replacement property is less than the factored base year value of the original property at the time of the transfer, then claiming the exclusion is not beneficial.
If you did not receive the homeowners’ or disabled veterans’ exemption on the original property, you can still qualify for a base year value transfer if you were eligible for one of these exemptions at the time of sale or within two years of the replacement property’s purchase or new construction.
Property owned by a legal entity (for example, a corporation) is not eligible for a base year value transfer.
How to apply for the base year value transfer exclusion:
Complete form BOE-19-B, Claim for Transfer of Base Year Value to Replacement Primary Residence for Persons at Least Age 55 Years. Obtain the claim form from the County Assessor’s Office where the replacement property is located. Submit the completed form to the same office.
When to file your claim:
To qualify for this base year value transfer, the claim must be filed with the County Assessor within three years of the date you purchased or completed construction on the replacement home.
The base year value transfer is still available for claims filed after the three-year period; however, the transfer will be granted beginning with the year that the claim is filed.
