Real Estate Market
TAKE ADVANTAGE OF PROP 19 !
By Sean Dinsmore Data by CAR
Top Producing Team Gilroy Intero , 2015-2018
Sean Dinsmore , Realtor Intero Real Estate Services www . TheDinsmoreTeam . com 408.710.2855 DRE # 01966405
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As we emerge from the pandemic , and as both life & the real estate market return to some sense of normalcy , homeowners age 55 + need to take a serious look at the benefits of California Prop 19 , which took full effect on April 1st , 2021 . Prior to Prop 19 , homeowners over the age of 55 who wanted to move faced serious restrictions if they wanted to avoid paying property taxes on their new purchase at the standard rate . Now , the possibilities are much greater , providing these homeowners the flexibility needed to purchase a new home anywhere in the state , even if the purchase price of the new home is greater than the sales price of your previous home . To put into perspective the number of homeowners that can benefit from these new rules , look at these stats :
• 52 % of California homeowners age 55 + have not moved since 1999 . This equates to 2.2 million homeowners .
• 77 % of California homeowners age 55 + have not moved since 2009 . This equates to 3.2 million homeowners .
• 57 % of owner-occupied homes in California were owned by people 55 + in 2019 . That means that 57 % of homeowners in California in 2019 would have qualified for Prop 19 benefits had the rules been in effect at that time .
HOW DOES IT WORK ?
Here are the main example scenarios :
BUYING A HOME IN A DIFFERENT COUNTY
Let ’ s take the example of a senior couple on a fixed income who live in a home currently valued at $ 800,000 . They originally purchased it for $ 125,000 , and it now has a tax base of $ 200,000 and they are paying $ 2,500 per year in property taxes .
The couple wants to sell their $ 800,000 home and purchase another $ 800,000 home in a different county closer to family . Under the old rules , their yearly property taxes would have increased to $ 10,000 per year . Under Prop 19 , the couple can keep their original tax base when they move across county lines ( or even within the same county ). They will continue paying $ 2,500 in property taxes , saving $ 7,500 per year ( with increased savings as the tax bases will / would have grown ).
BUYING A MORE EXPENSIVE HOME
Another senior couple with a home valued at $ 800,000 ( and also paying $ 2,500 per year in property taxes ) wants to downsize from their current large , two-story home that is too big for their needs , too expensive to maintain , in need of updates , and has stairs that are difficult for them to use .
They want to downsize to a more manageable-sized single-story home in a newly built senior community where the new builds cost $ 900,000 . Under the previous rules , their yearly property taxes would have increased to $ 11,250 .
Under Prop 19 , the couple ’ s tax base will only slightly increase . The property tax base of the new home is determined by adding the difference in the sales price of the new home ($ 900,000 ) and the original home ($ 800,000 ) to the existing tax base . With their original tax base at $ 200,000 , their new tax base would be : $ 200,000 + ($ 900,000 - $ 800,000 ) = $ 300,000 . Their property taxes would only increase to $ 3,750 , saving them $ 7,500 per year .
The bottom line is that the new tax savings from Prop 19 provide an incredible amount of increased flexibility for homeowners over the age of 55 . These benefits will allow these homeowners to improve their living situation without increasing their monthly expenses , or only slightly increasing them depending on the move . Take full advantage while the market is hot and set yourself up for an improved life !
10 SUMMER 2021 gmhTODAY Magazine gmhtoday . com