Base Year Transfer
Transferring Your Prop 13 Base Year Value to a Replacement Residence
One of the main reasons that California voters passed Proposition 13 in June 1978 was to protect themselves against escalating property taxes as the value of their property increased. One unintended effect of Proposition 13 was to discourage people from changing their residence as their family circumstances evolved because they would lose their Proposition 13 factored base year value.
Fred, 56, and Nelda, 53, wish to sell their four-bedroom home on a large lot now that their children are grown and have homes of their own. They have lived in their current home for many years and their 1983 Proposition 13 base year value of $125,000 has only grown to $295,462 by 2023. Their property tax bill is approximately $3,200 per year. Their home today is worth $1,200,000. Fred and Nelda have found a townhouse with two bedrooms and no yard for $899,000 but they are unwilling to make the move because under Proposition 13 this change of ownership will establish a new base year value for the townhouse based primarily on their purchase price and their tax bill will jump from $3,200 to approximately $9,300 per year. They are on a fixed income and cannot afford the additional $6,100 per year in taxes.
To solve this problem California voters passed Proposition 19 in November 2020 that permits people over 55 years of age or anyone who is severely and permanently disabled regardless of age to sell one home and buy another within two years in any California county. They can take their factored Proposition 13 base year value with them with certain adjustments if they pay more for the replacement than the sales price of the original. In the example above, Fred and Nelda could move to the townhouse and still pay $3,200 per year in property taxes (their total bill may be larger or smaller, however, depending on the tax rate and fees charged at the new residence) plus future increases not to exceed 2%. Only one of the owners has to be over 55 or disabled on the date the original house is sold. If the original residence is sold prior to purchasing the replacement residence, there can be a bonus of five or ten percent of the sales price depending on how long they wait to buy the replacement. A same day transaction qualifies for the 5%, waiting a year qualifies for the 10%.
If Fred and Nelda buy a replacement residence that costs more than the amount they received for their original home, the difference is added to their base year value when it is moved to the replacement. As an example, the couple sell their original home for $1,200,000 and buy a home for $1,400,000. The adjusted base year value of the replacement would be $295,642 plus $200,000 for a total of $495,642. Fred and Nelda would still save almost $10,000 per year in property taxes.
If the replacement home is purchased before the original is sold, Fred and Nelda would have to pay the higher taxes until the original sells. At that point they will receive a supplemental refund for the higher taxes from that point forward.
The Proposition 19 Base Year Transfer Exclusion claim cannot be filed until both transactions have closed escrow. At that point applicants should contact Napa County Assessor-Recorder-County Clerk John Tuteur at 707-253-4459 or by email. More articles can be found on the Assessor's page.