Age 55 marks a financial milestone for many Californians, bringing eligibility for a valuable Proposition 19 property tax benefit, as well as other perks and discounts.
Steven Boyle/S.F. Chronicle from Getty Images elements
Every birthday is worth celebrating. But in California, you might celebrate a little more when you turn 55 — especially if you own a home.
What’s all the excitement about? It’s the age you become eligible to sell your home and buy a new one while retaining your property tax basis, thanks to Proposition 19.
In 2020, voters approved an overhaul of California’s property tax rules to address an unintended consequence of the state’s landmark Prop 13. That measure, passed in 1978, limited property tax rates to 1% of a home’s assessed value and capped increases to no more than 2% annually, no matter how much the property was worth.
Article continues below this ad
That tax break, while popular, resulted in a “lock-in” effect for many longtime homeowners: They were reluctant to move to new homes, because they’d pay so much more in reset property taxes. Before Prop 19, seniors could move their tax basis to another property only once, with restrictions. Prop 19 expanded the benefit and increased the number of allowed transfers to three — giving seniors more enticement to downsize, freeing up larger homes for families.
Now, once you or your spouse turns 55, you can sell your home and move within the state of California up to three times while transferring the property tax basis for up to 110% of the current assessed value of your previous home.
San Francisco Chronicle Logo
Make us a Preferred Source to get more of our news when you search.
Add Preferred Source
• Got money questions? Here’s how to send them to our California budgeting advice columnist
• Read: Bay Area housing prices aren’t going to crash. This is what will happen instead
Article continues below this ad
James Cunningham, an estate planning, trust and probate law attorney and founder of Bay Area-based CunninghamLegal, sketched out a theoretical example of what that could look like in practice: Let’s say you own a condo near Daly City that you bought for $500,000. You sell it for $1 million, and if you’re a joint filer, you get the $500,000 capital gains exclusion — not related to Prop 19, but part of the federal tax code — on that growth.
Within two years of the sale, you buy a home on the golf course in Lincoln for $1 million. By transferring the property tax basis, you’ll pay roughly the same property taxes on that home as you did on your condo.
There’s some paperwork involved — Cunningham says he’s had people call his office to ask for help with it, though he says most people can do it all themselves — and you have to make sure the sale of the previous home and the purchase or construction of the new home happen within two years of each other. If the new home is worth more than the old one, the difference is added to your transferred assessed value, increasing your property taxes — though by far less than a full reassessment would trigger.
55-year-olds might not think of themselves as “seniors,” particularly in the Bay Area, where tech workers and academics might feel like they’re hitting their career stride around that stage of life. And as the age of first-time homebuyers and first-time parents creeps higher, particularly in the Bay, people with decades left on their mortgages and middle schoolers at home might not realize they’re a few short years from being teed up for a big tax break.
• Read: Should I get a reverse mortgage or a home equity investment?
Article continues below this ad
• Read: Can leaving the workforce early lead to cognitive decline? Here’s what experts say
Other benefits of turning 55
Fifty-five is also the age when you become eligible for 55-and-older communities. In 1995, the U.S. Congress passed the Housing for Older Persons Act, which legalized a sort of reverse age discrimination in housing laws: It allowed housing communities that restrict residency based on age. In 55+ communities, 80% of homes must have at least one resident that age or older. Often, families with children under 18 aren’t allowed to move in at all.
Mary Clements Evans, a certified financial planner and founder and president of Evans Wealth Strategies, said her clients rave about them. “I’ve only had one not like it,” she said.
There are a lot of perks: Clements Evans said they have clubs for just about everything with lots of activities and community events. Being around other people your age makes it easier to make friends compared to a neighborhood filled with young families, she said. And some people consider it a perk that younger guests aren’t allowed to visit for long: It gives you a great excuse for why your adult child can’t move back in with you.
Article continues below this ad
If you have a jumbo mortgage, reverse mortgage eligibility may kick in at age 55 too. Real estate professionals and senior housing advocates will tell you reverse mortgages aren’t for everyone, which is true, but they are the right call in some circumstances.
Fifty-five is also the age when certain senior discounts start to kick in. If you get an AARP membership, you gain access to numerous member discounts, including quite a few chain restaurants.
National chains with a presence in the Bay Area that offer senior discounts for 55+ include Denny’s, IHOP, Michaels, Goodwill and Ross Dress for Less. Senior discounts are sometimes only available on certain days or time of day, or give access to special menus with lower costs but also smaller portions.
Internet, cable and cellphone companies also sometimes offer discounted plans based on age. It’s worth reaching out to your provider to ask.
Many other retailers and restaurants offer senior discounts, Clements Evans said, but don’t always publicize them. If you go anywhere regularly, ask what senior discounts might be available.
Article continues below this ad
Age 62 is another savings milestone
It’s probably not news to you that 62 is the earliest age you can start claiming Social Security benefits (though experts still say it’s best to wait as long as possible to do so, or claim strategically with your spouse).
Standard reverse mortgages also become available when you turn 62. And Clements Evans said many more senior discounts kick in at 62, including a lot of movie theater bargains. Even more discounts unlock at age 65.
• Read: A record number of people are claiming Social Security — but what’s really the best age to start?
• Read: This might be the smartest way to think about claiming Social Security
Some Californians have another option starting at age 62 to help offset their cost of living. California is one of a growing number of states that allow older low-income homeowners with a certain amount of equity to postpone paying property taxes until a title transfer occurs — for example, if the home is sold — or when the current owner moves out or dies without a surviving spouse. The property taxes are converted to a lien on the property with 5% interest.
Californians who are blind or disabled may also qualify. Total household income must be $55,181 or less, and the property must be the principal place of residence for claimants, among other eligibility requirements.
To get more information on eligibility and the application process for the California Property Tax Postponement Program, the California Controller’s Office says to call (800) 952-5661 or email postponement@sco.ca.gov, or visit www.sco.ca.gov/ard_ptp_faq.html