How Does Prop 19 Work When You Downsize in San Mateo County?

Many of the homeowners we talk with in San Carlos have lived in their homes for twenty or thirty years. The kids have moved out. The stairs are getting harder. A smaller place sounds good.

Then property taxes come up.

If you bought your home decades ago, your property tax is based on what you paid back then. Buying something new at today's prices would normally mean a much larger tax bill. For a lot of people, that one number is the reason they stay put.

Prop 19 changed that for homeowners who are 55 or older. It lets you take your current tax base with you when you sell and buy another home in California. Below, we explain how the Prop 19 property tax transfer works, what it could save you, and what to do before you sell. As Realtors who have helped San Carlos, Belmont, and Redwood City homeowners for more than twenty years, we have walked many families through this decision, and we hope it helps you see your options more clearly.

What Is Prop 19, and Who Qualifies for the Property Tax Transfer?

Under Prop 13, your home's assessed value is set when you buy it. After that, it can only go up by 2% a year at most. That is why a home bought in 1998 can have an assessed value far below what it would sell for today.

California voters passed Prop 19 in 2020. Since April 1, 2021, it has let certain homeowners move that assessed value, also called the base year value, to a new home.

You may qualify if you are:

55 or older when you sell. If you are married, only one spouse needs to be 55.
Severely and permanently disabled.
A homeowner whose home was damaged by a wildfire or natural disaster.

The main rules for homeowners 55 and older:

Both homes must be your primary residence. The home you sell must have qualified for the homeowners' exemption. Vacation homes and rentals do not count.
You can buy anywhere in California. The new home does not have to be in San Mateo County.
You have two years. You can buy the new home up to two years before or after you sell the old one.
You can use it up to three times in your lifetime.
It is not automatic. You have to file a claim with the county where the new home is located.

Before 2021, the rules were much tighter. Most people could use this benefit only once, and usually only within the same county or a short list of counties that accepted transfers. Prop 19 opened it up statewide.

The San Mateo County Assessor's Prop 19 page and the State Board of Equalization's Prop 19 resources are good places to read the official details.

How Much Could Prop 19 Save You?

Every situation is different, but a simple example helps.

Say you bought your San Carlos home in 1998 for $500,000. With the 2% yearly limit, its assessed value today might be around $850,000. The home itself would sell for much more, say $2.7 million.

Now say you sell and buy a $2 million single-level home or townhome.

Without Prop 19, your new home is assessed at $2 million. The basic 1% property tax rate comes to about $20,000 a year.
With Prop 19, you keep your $850,000 base. The basic tax comes to about $8,500 a year.

That is a difference of roughly $11,500 a year, before local bonds and assessments. Over ten years, it adds up to well over $100,000.

What if the new home costs more?

Prop 19 is meant for moving to a home of equal or lesser value. "Equal or lesser" depends on timing:

Bought before you sell: up to 100% of what your old home sold for.
Bought within the first year after you sell: up to 105%.
Bought in the second year after you sell: up to 110%.

You can still buy a more expensive home. In that case, the difference in value is added to your tax base. Using the example above, if you sold for $2.7 million and bought for $3 million, about $300,000 would be added to your $850,000 base. Your new assessed value would be around $1.15 million, still far below the purchase price.

The Board of Equalization's fact sheet walks through these limits. The county can confirm exactly how they apply to your sale and purchase.

LEARN MORE: What Does It Cost to Sell a Home in San Mateo County?

What Should You Do Before You Sell?

Prop 19 removes one big reason to stay. It doesn't answer every question about moving, though. A few things are worth sorting out early.

Look up your current assessed value. The county's property tax look-up tool shows your current tax bill. Your assessed value is on the bill. This is the number you would be carrying with you.

Decide which comes first, the sale or the purchase. Buying first means only one move and no rush to find a place. It also means carrying two homes for a while, and the value limit is 100% of your sale price instead of 105% or 110%. Selling first frees up your equity and gives you a little more room on price, but you need a place to live in between. Some sellers arrange a rent-back after closing to buy time. There is no one right answer. It depends on your finances, your timeline, and what is available in the area you want.

Know the market you are moving into. In some San Carlos condo and townhome complexes, only a few units come up for sale in a year. One couple we worked with sold their San Carlos house and bought a condo in town at the same time. They told us it helped to see data on how rarely units came up in the complexes they liked. It also helped to be connected with someone who could review the HOA's finances with them, since they had never owned in an HOA before. That kind of preparation makes the timing much easier to manage.

Talk to your accountant about capital gains. If the home has been your primary residence for two of the past five years, you may be able to exclude up to $250,000 of gain, or $500,000 if you file jointly. The IRS explains the rules in Topic 701, Sale of Your Home. For long-time Peninsula owners, the gain can be larger than the exclusion, so this is worth reviewing before you list.

File your claim after you buy. The form for homeowners 55 and older is BOE-19-B. Homeowners with a severe disability use BOE-19-D. The San Mateo County Assessor has both forms, with options to sign online, on its base year value transfer page. If your new home is in another county, you file with that county's assessor instead. You have up to three years after buying to file, but filing soon after closing is simpler.

What about passing the house to your children?

Prop 19 also changed the rules for parents who planned to leave their home to their kids. Since February 16, 2021, a child who inherits the family home keeps the parents' tax base only if they move in as their primary residence within a year. Even then, the benefit is capped. For transfers between February 16, 2025 and February 15, 2027, the cap is the home's assessed value plus $1,044,586. Anything above that is added to the tax base.

For some families, this changes the math on keeping the house versus selling. If an inheritance plan was part of your thinking, it is worth reviewing with your estate planning attorney before you decide anything.

LEARN MORE: How to Use Property Tax and Permit Lookup Tools in San Mateo County

Thinking About Downsizing in San Carlos or the Mid-Peninsula?

If property taxes were the main thing keeping you in a home that no longer fits, Prop 19 may make a move more realistic than you thought. It is still a big decision, and it helps to look at the whole picture before you commit to anything.

We are happy to sit down with you and go through it. We can talk about what your home might sell for, what is available in the areas you are considering, and how the timing could work. You can start with a free home valuation, look through homes we have sold, or contact our team to set up a conversation. There is no pressure and no timeline. Many of the sellers we work with start talking to us a year or more before they move.

This article is general information, not tax or legal advice. The figures are examples for illustration only. Prop 19 eligibility and the value of any transfer depend on your situation, so please confirm the details with the San Mateo County Assessor's office and talk with your accountant or attorney before making decisions.