Did you know property owners in California who are severely and permanently disabled can transfer the taxable value of their home when they sell their home and buy or build another home, and avoid paying higher property taxes?
In November 2020, California voters approved Proposition 19 allows severely and permanently disabled persons to transfer the taxable value of their principal residence to a replacement principal residence located in any California county, up to three times, provided certain requirements are met.
Prop. 19 excludes replacement homes from being reassessed at current market value upon change of ownership, which can significantly increase property taxes compared to those that were paid on the original residence. “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 disabled persons for transfers that occur on or after April 1, 2021.
For such transfers that occurred before April 1, 2021, see Publication 800-4a information sheet, Transfer of Property Tax Base to Replacement Property – Disabled Persons Occurring On or Before March 31, 2021. The base year value transfer is available to any severely and permanently disabled person who sells their principal residence (referred to as the original property) and buys or builds a replacement residence (referred to as the replacement property) within two years of the sale of the original property.
The acquisition or construction of a 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 property. For purposes of California property taxation, real property is reassessed at market value when sold or transferred, and upon completion of new construction. As a result of purchasing a different home or building a new one, a 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 severely and permanently disabled 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 your vacation home.
The replacement property can be purchased within two years (before or after) of the sale of the original property.
You or your spouse living in the home must be severely and permanently disabled when you sell your original property.
Severely and permanently disabled” for purposes of the base year value transfer is defined by Revenue and Taxation Code section 74.3 as: “any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person, and that has been diagnosed as permanently affecting the person’s ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs.”
You or your spouse must have a severe and permanent physical disability such that the primary purpose of moving to a replacement home is to satisfy the disability-related requirements or to alleviate financial burdens caused by the disability.
Proof of severe and permanent disability is provided through completion of a form that includes a certification by a licensed physician or surgeon identifying the disability and the reasons why a move to a replacement home is necessary.
There is no age requirement to receive the benefit of a base year value transfer to your replacement property if you or your spouse are severely and permanently disabled.
You can transfer your base year value up to three times under Proposition 19, regardless of whether a base year value transfer was previously granted prior to April 1, 2021, under Proposition 60, 90, or 110.
Rather than purchasing a replacement home, you can make changes or additions to your existing home to make it more accessible for a severely and permanently disabled person who is a resident of the home. Such changes would not cause any increase in assessment. For additional information on this exclusion, contact your Assessor’s office and obtain form BOE-63, Disabled Persons Claim for Exclusion of New Construction for Occupied Dwelling.
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-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’ exemption 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 two forms: (1) BOE-19-D, Claim for Transfer of Base Year Value to Replacement Primary Residence for Severely and Permanently Disabled Persons and (2) BOE-19-DC, Certificate of Disability.
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.
