Prop 19 With Prop 19, you seem to have two choices:
1. Do nothing. Pay significantly higher property taxes on any inherited property, but get the step up in cost basis for properties.
2. Transfer property before Feb. 12 to keep property taxes but if you sell, pay step up in cost basis taxes of 30% (20% Federal, 9.3% State).
So which one is better?
Say the property's cost basis is $25K and today the property is worth $625K.
Property tax is currently $500/year and after Feb 16, property tax goes to $7,812/year.
The step up in cost basis is $312,500.
30% of $312,500 is $93,750, which you would need to pay if you transfer the property and later sold.
The difference in property taxes is $7812-$500 or $7,312/year.
$93,750/$7,312 = 12.8, or 13 years.
So you would need to keep the property 13 years before selling to break even.
On to rent payments. Currently the property rents for $1,300/mo, but could rent for $2,450 according to Zillow.
At $1,300/mo, your net is $15,600.
Raising the rent to $2,450/mo, your net is $29,400.
$15,600 - $7,812 (property tax) = $7,788.
To get the same return prior to prop 19 of $15,100/year, rent has to increase by $609/mo, or $1,900/mo just to pay property taxes.
So what is the answer?
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