Most homeowners are familiar with the benefits of the capital gains exemption they enjoy when they sell their home. Live in the property at least two years, then enjoy a capital gains exemption of $250,000 for a single person or $500,000 for a couple on the appreciated value. This is in fact one of the most well know home ownership benefits when considering real estate as an investment vehicle. Many sellers who purchased only two or three years ago are now deciding to sell and take all this benefit tax free and move onto a different area or home.
California Proposition 19 passed in November of 2020 and the timing with Covid considerations could not have been more timely. Prop 19 enabled homeowners over the age of 55 to now move their home’s tax basis anywhere in the state, where previously it had been restricted to the same county. With quarantine, remote working and evolving home needs many homeowners took advantage of prop 19 and moved their tax basis to new counties where they could buy more for their money and move outside their county.
Homeowners that are educated about the Capital Gains Exemption and Prop 19 are in the perfect situation to make a big move while enjoying the benefits! For example if you and your spouse purchased a home in the Bay Area for $500,000 twenty years ago and now it's worth $1,500,000. You could sell your home here, keep $500,000 off the top tax free, buy a home in Lake Tahoe or San Diego for $1,000,000 and only pay property taxes on your original $500,000 tax basis! This presents an amazing opportunity to transition into retirement with a large nest egg and minimal tax liability.
If some of these options would apply to the sale of your home please contact me today and let’s discuss the best strategy to maximize your proceeds and set you up for success!