Think It’s Too Expensive to Downsize Your House? Don’t Forget About CA Prop 19

Today I’m talking about a scenario that I am dealing with right now. It’s a really great reminder, because there are a lot of people who don’t know this.

In California, under Prop 19, if at least one of the homeowners is 55+ years old and you want to buy a different house, you can transfer your current assessed value to the new house. This strategy could potentially help you avoid a big jump in property taxes.

Real-Life Scenario for Downsizing

Here’s the scenario that I am dealing with: someone who has owned the house for 30 years. They bought it for just under $200,000. The current assessment is $300,000, but now it’s worth almost $1 million. They want to downsize, and the houses they are looking at are around $800,000.

In California, it would mean that your new taxes are going to be based on the $800,000 number. But the cool thing about Prop 19 is that we can take the $300k assessed value and move it over, for a greater than 50% savings on property taxes. Instead of paying property taxes at $800k (which would be close to $9,000 per year), the homeowner can pay based on a $300k assessment (which puts property taxes around $3500 annually).

This is a really significant difference! It is the difference between whether someone can afford to downsize. When you consider other costs, such as saving money on maintenance costs by moving into a smaller home, it can really make sense. Even if there is a small loan on the new property with high interest rates, the property tax savings on the purchase can help to balance things out.

There are Options to Help with Affordability

I wanted to share this because there is so much talk about affordability right now. But there are things that we can do to make it more affordable, depending on your unique situation. This situation really makes sense for people who are empty-nesters and ready to sell the family home that they’ve owned for so many years.

If you are looking for options that work with your personal situation, then I’m always here to help. Reach out at your convenience so we can discuss your needs and find the ideal solution for your next home purchase.