Do You Have to Move Into a House to Keep a Low Property Tax Rate in California?

By Ramesh Rao, Realtor® | Coldwell Banker Realty, Cupertino

Whether you must move into a property to keep your low property tax rate depends entirely on how you acquired the home and which exemptions or benefits apply. In California, the rules can differ sharply between inherited homes, senior tax base transfers, or homes kept as rentals.

Here’s what you need to know and how to protect your low property tax base while making smart real estate decisions in Silicon Valley.

1. Inherited Properties and California Proposition 19

Under Proposition 19, heirs can now keep their parents’ or grandparents’ low property tax base but only if they move in and make it their primary residence.

Rule	Requirement	Deadline
Primary Residence	The inheriting child or grandchild must occupy the home as their principal residence.	Within one year of transfer
Application	File a “Claim for Reassessment Exclusion” and a Homeowners’ Exemption with your county.	Within one year
Violation	If you move out or rent the home, the property is reassessed at current market value.	Immediate upon vacancy

Silicon Valley Example:

If a parent’s Cupertino home purchased for $500,000 is now worth $3 million, living in the home keeps taxes at roughly $6,000 per year. Renting it triggers reassessment, pushing taxes to more than $33,000. That’s an annual difference of almost $27,000.

Expert Insight:
These rules have blindsided many local families. The one-year filing deadline after inheritance is strict. Miss it, and you lose the benefit permanently. If you’re inheriting a home, talk to your real estate advisor before deciding whether to rent or sell.

2. Transferring Your Own Low Tax Rate (Proposition 19 for 55+, Disabled, or Disaster Victims)

Eligible California homeowners—those aged 55+, severely disabled, or affected by a declared disaster—can transfer their existing low tax base to a new property anywhere in the state.

Factor	What It Means
Eligibility	Age 55+, disabled, or disaster-displaced
Value Rule	New home can be of equal or lesser value; a more expensive property adds only the difference
Timing	Buy and move in within two years of selling your old primary home
Benefit	Keeps your original low tax base, preventing a dramatic property tax increase

Illustration:

You sell your $2 million home in Cupertino (with a $600,000 assessed value) and purchase a $2 million condo in Los Gatos. You can transfer that $600,000 base—saving approximately $15,000–$18,000 annually in property taxes.

Pro Strategy:
Many homeowners stay in large homes longer than they wish, fearing a higher tax bill after selling. Proposition 19 opens up a new path to rightsize without losing your low rate. Always confirm deadlines and value limits before you close escrow.

3. Maintaining the Homeowners’ Exemption (Even for Small Savings)

The Homeowners’ Exemption gives California property owners a $7,000 reduction in assessed value—a modest saving but still worth protecting.

Detail	Explanation
Who Qualifies	Owner must occupy the property as their principal residence.
When It’s Lost	Renting or vacating the property disqualifies you.
How to Fix It	File the exemption form with your county assessor (check your tax bill annually).

Hidden Tip:

If you refinanced, transferred title into a trust, or recently inherited property, your exemption might have dropped off automatically. Reinstating it is quick—and ensures your tax record clearly shows the property as owner-occupied.

4. Existing Homeowners Under Proposition 13

If you already own a property and remain the owner, your assessed value is protected from large jumps through Proposition 13, capping annual increases at about 2%.

Moving out does not trigger a reassessment—but you’ll lose your small homeowners’ exemption while it’s rented.

Situation	Reassessment Risk
You move out but retain ownership	None (taxes stay capped)
You rent to others	Keeps base rate but loses exemption
You change title (LLC, transfer, etc.)	May trigger reassessment unless structured properly

Local Reminder:
Silicon Valley homeowners often add kids or LLCs to title for estate planning. That simple step can trigger full reassessment unless properly advised. Always consult your tax counsel before making title changes.

5. Quick Comparison: Do You Have to Move In?

Property Type or Rule	Must Move In?	Low Tax Rate Preserved?	Key Risk
Inherited Property – Prop 19	✅ Yes	✅ Yes, if occupied within one year	Losing low base if rented or vacant
Age 55+ Base Transfer	✅ Yes	✅ Yes, if new home is primary residence	Missed 2-year window
Homeowners’ Exemption	✅ Yes	⚙️ Minor benefit only	Forgot to reapply
Existing Owner (Prop 13)	❌ No	✅ Yes, unless ownership changes	Loss of smaller exemption

6. Smart Tax Planning Strategies for Silicon Valley Homeowners

Here’s what seasoned homeowners and investors should keep in mind:

File exemption paperwork promptly: Tax savings are often lost not through non-eligibility, but missed forms or deadlines.
Plan estate transfers ahead: Discuss Prop 19’s effects before a family trust executes.
Reassess investment vs. occupancy: Sometimes renting looks profitable, but higher taxes can erase returns.
Document residency: Keep items like driver’s license, voter registration, and utilities linked to your primary home.
Use an advisor team: The best solutions pair your Realtor, tax accountant, and estate attorney.

7. When Moving In Makes Sense

Situation	Move In If…	Hold or Rent If…
Inheritance	You can occupy within a year, plan to stay long-term	Market rents or distance make occupancy impractical
Downsizing (55+)	You want to move closer to family or simplify living	You’re leaving California
Empty Nesting	You’re ready to lock in growing equity	You want rental income despite tax increases

Real Example:

A Cupertino family inherited a 1970s ranch home worth $3.2M. By moving in for at least two years, they preserved the low base, avoided reassessment, and later leveraged equity for a remodel—adding long-term value while keeping taxes stable.

8. Why Local Expertise Matters

Tax rules protect wealth only when applied correctly. In Silicon Valley, where property values are high, small paperwork missteps can cost families tens of thousands annually.

That’s why homeowners turn to Ramesh Rao, Coldwell Banker Realty, a Cupertino-based Realtor known for combining deep real estate experience with practical guidance on tax-smart home decisions. My role is to help you see not just the property, but the strategy—how ownership choices today affect your wealth tomorrow.

If you’re navigating inheritance, considering a move under Proposition 19, or debating between renting and selling, let’s review your specific numbers and timeline confidentially.

Have a Question About Your Tax Base or Next Move?

📞 Contact Ramesh Rao, Coldwell Banker Realty
📍 Cupertino | Serving Saratoga, Los Altos, Sunnyvale & Palo Alto
🌐 www.RameshRao.com
✉️ info@rameshrao.com

Let’s protect your home’s value—and your peace of mind.

Do you have to move into a house to keep a low property tax in California?