Taxpayers' Rights Advocate (TRA) Information Sheet (BOE) - Property Tax Savings: Transfer of Property Tax Base to Replacement Property

INFORMATION SHEET

www.boe.ca.gov/tra

CALIFORNIA STATE BOARD OF EQUALIZATION | TAXPAYERS’ RIGHTS ADVOCATE OFFICE

The State Board of Equalization Taxpayers’ Rights Advocate Office is committed to helping California

taxpayers understand property tax laws, and be aware of exclusions and exemptions available to them.

Transfer of Property Tax Base to

Replacement Property – Age 55

and Older

Did you know property owners in California

who are age 55 and older 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, which, among other things,

allows persons over 55 years of age 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. This

prevents the replacement home from being

reassessed at market value due to a change in

ownership, which can significantly increase the

property taxes from those that were paid on

the original residence. “Taxable value” means

the 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, 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 that 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.

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.

Value Comparison Test and

Calculation for Replacement

Property’s Base Year Value

A claimant may purchase or newly construct

a replacement property of any value; however,

any value in excess of the original property’s

market value is added to the original property’s

transferred base year value. If the replacement

property is purchased or newly constructed

after the original property is sold, the

replacement’s market value can exceed the

original’s market value up to 105 percent of the

original’s market value if the replacement is

purchased within the first year after the sale of

the original, or 110 percent within the second

year, with no excess added to the transferred

taxable value.

PROPERTY TAX SAVINGS: TRANSFER OF PROPERTY TAX BASE

TO REPLACEMENT PROPERTY – AGE 55 AND OLDER

Publication 800-3 (6-22)

If the replacement property is of equal or lesser

value as compared to the original property,

then the factored base year value of the original

property, plus any applicable annual inflationary

adjustments that occurred between the date

the original property was sold and date that

the replacement property was purchased or

new construction completed, becomes the new

base year value of the replacement property.

“Equal or lesser value” means that the full cash

value (commonly referred to as market value) of

the replacement property does not exceed one

of the following:

• 100 percent of the original property’s

market value if the replacement property is

purchased or new construction completed

before the sale of the original property,

• 105 percent of the original property’s

market value if the replacement property is

purchased or new construction completed

within the first year after the sale of the

original property,

• 110 percent of the original property’s

market value if the replacement property is

purchased or new construction completed

within the second year after the sale of the

original property.

If the replacement property’s market value

is greater than the original property’s market

value, then the amount above the “equal or

lesser value” of the original property’s market

value is added to the transferred factored base

year value.

Therefore, in cases where the replacement

property is purchased or newly constructed

before the sale of the original property, and

the replacement’s market value exceeds the

original’s market value, then the difference

(excess) will be added to the transferred base

year value. If the replacement is purchased or

newly constructed after the sale of the original

property, depending on the time period when

the replacement is purchased, the amount

above 5% or 10% over the original property’s

market value is added to the transferred base

year value.

Example 1- Replacement Purchased Before

Sale of Original

The market value of the replacement property at

the time of purchase in July 2021 was $730,000.

The market value of the original property at

the time of its sale in September 2021 was

$700,000 and its assessed value (factored

base year value) was $225,738. Since the

replacement was purchased before the sale

of the original, then 100 percent of the original

property’s market value would be compared

to the replacement property’s market value.

Since the replacement’s market value is greater

than that of the original property, the difference

of $30,000 ($730,000 - $700,000) is added

to the original property’s factored base year

value of $225,738. The new base year value of

the replacement property would therefore be

$255,738 ($225,738 + $30,000).

Example 2- Replacement Purchased After

Sale of Original

The market value of the replacement property

at the time of purchase in September 2021

was $730,000. The market value of the original

property at the time of its sale in July 2021

was $700,000 and its assessed value (factored

base year value) was $225,738. Since the

replacement was purchased within the first

year after the sale of the original property,

105 percent of the original property’s market

value ($700,000 x 105% = $735,000) would

be compared to the replacement property’s

market value ($730,000). The difference that

exceeds 105 percent of the original’s market

value would then be added to the original’s

factored base year value. In this case, there

is no excess value to be added because the

original property’s adjusted market value of

$735,000 is greater than the replacement

property’s market value of $730,000. Therefore,

the original property’s factored base year value

of $225,738 would transfer to the replacement

property without any excess added.

However, if the market value of the replacement

property was $800,000 instead of $730,000,

$65,000 in excess value would be added to

the $225,738 transferred value. The excess

is calculated as follows: $800,000 minus the

original’s adjusted market value of $735,000

($700,000 x 105%) = $65,000. The new base

year value of the replacement property would

then be $290,738 ($225,738 + $65,000).

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

Publication 800-3 (6-22)

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.

Tax savings of Example 1 from above: The

market value of the replacement property at

the time of purchase was $730,000; normally

the change in ownership would result in the

property being reassessed at its market value,

which establishes its new base year. However,

because the owner applied and qualified for

a base year value transfer, the new base year

value of the replacement property is $255,738.

This results in lower property taxes because the

assessed value of the replacement property is

$474,262 lower than its market value ($730,000

- $255,738 = $474,262). Given the one percent

statewide tax rate, this would save over $4,742

in property taxes per year.

Tax savings of Example 2 (scenario 2) from

above: The market value of the replacement

property at the time of purchase was $800,000;

normally the change in ownership would result

in the property being reassessed at its market

value, which establishes its new base year.

However, because the owner applied and

qualified for a base year value transfer, the new

base year value of the replacement property is

$290,738. This results in lower property taxes

because the assessed value of the replacement

property is $509,262 lower than its market

value ($800,000 - $290,738 = $509,262). Given

the one percent statewide tax rate, this would

save over $5,092 in property taxes per year.

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.

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 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

Proposition 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.

Publication 800-3 (6-22)

• 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, corporation) is not eligible for a

base year value transfer.

Where to Find Additional

Information

Visit the State Board of Equalization’s (BOE)

website at www.boe.ca.gov for property tax

information. For comprehensive information on

Proposition 19, visit www.boe.ca.gov/prop19.

Refer to LTA 2022/009, Implementation of

Proposition 19: Base Year Value Transfers

and Property Tax Rule 462.540, Change in

Ownership – Base Year Value Transfers.

Visit the County Assessor’s website where the

property is located. The BOE’s website has

contact information for each County Assessor

in California, available at