Downsizing in the North Bay: Selling, Moving and Keeping Your Tax Base

Downsizing in the North Bay usually means selling a long-held home and buying or renting a smaller one, and the two biggest money questions are property tax and income tax. If you are 55 or older, Proposition 19 lets you carry your current taxable value to a replacement primary residence anywhere in California, bought within two years before or after the sale, up to three times. Separately, the federal home-sale exclusion can shelter up to $250,000 of gain, or $500,000 for most married couples filing jointly. The rest of the plan is choosing the housing type, the order of the two transactions and the timing of the move.

This guide is about your own move: what each kind of housing involves, how the tax rules fit together, and how to sell and buy without moving twice. It does not tell you where to live; that depends on your plans, budget and the property itself.

Start with the housing decision

Each option comes with different paperwork, monthly costs and rules. Compare them on what you would own, what you would pay each month and what you would sign.

Property features matter as much as the category. Features worth checking include a single-level floor plan, a bedroom and full bath on the entry level, a step-free entry, less yard, and a garage close to the kitchen. Note these features on every home you tour, since listings rarely describe them consistently.

For local options, see our pages on Sonoma County 55+ communities and mobile and manufactured homes in Sonoma County.

What “55+” means legally

An age-restricted community is defined by law, not by marketing. Two sets of rules apply, and the association’s governing documents say which it follows.

• California. Civil Code section 51.3 allows a senior citizen housing development of at least 35 dwelling units to limit residency to senior citizens, defined there as 62 or older, or 55 or older in a senior citizen housing development, plus qualified permanent residents and permitted health care residents.
• Federal law. The Fair Housing Act exemption for housing intended for occupancy by persons 55 or older requires that at least 80% of occupied units have at least one occupant 55 or older, that the community publish and follow policies showing that intent, and that it verify occupancy through surveys or affidavits (42 U.S.C. 3607).

Ask for the CC&Rs, the age-verification procedure and the rules on guests and other household members before you write an offer. Oakmont in Santa Rosa is one example of an age-restricted association; our Oakmont guide explains how its rules work.

Keeping your tax base with Proposition 19

Since April 1, 2021, owners 55 or older can transfer the taxable value of their primary residence to a replacement primary residence, according to the State Board of Equalization. The rules that matter most for planning:

• The replacement can be anywhere in California, including a move between Sonoma, Napa and Marin.
• It must be bought or built within two years before or after the sale of the original home.
• The transfer can be used up to three times.
• A more expensive replacement does not disqualify you; the amount over the limit is added to the transferred value.

You file Form BOE-19-B with the assessor of the county where the replacement is located, within three years of buying or completing it. Our full guide to the Prop 19 base year value transfer includes a worked BOE example and the filing details.

The income tax side of the sale

Property tax and income tax are separate. Section 121 of the Internal Revenue Code excludes up to $250,000 of gain, or $500,000 for married couples filing jointly when both meet the use test, if, during the five years ending on the sale date, you owned the home and lived in it as your principal residence for periods adding up to two years. You generally can’t use the exclusion more than once in two years.

If your gain could exceed those limits, a few details are worth knowing:

• Former rental use. Depreciation taken after May 6, 1997 is outside the exclusion, and periods after 2008 when the home was not your principal residence can reduce it.
• Time in a care facility. Under Section 121(d)(7), if you become physically or mentally unable to care for yourself after living in the home at least one year of the five, time in a licensed facility counts as use of the home.
• Basis at death. Property inherited from a decedent generally takes a basis equal to its fair market value at the date of death (Section 1014), and for community property, the surviving spouse’s half can also be adjusted. That is one reason some owners ask a tax adviser whether to sell now or hold before deciding.

Our guide to capital gains on a California home sale covers the calculation in more detail.

Sell first, buy first, or both at once

The order you choose affects your cash, how many times you move and the Prop 19 value test.

• Buy first. You move once and on your own schedule, but you need the cash or a bridge loan to close before your sale, and the Prop 19 limit is 100% of your current home’s value. See buying before you sell.
• Sell first. You know your proceeds and get the 105% or 110% limit, but you need somewhere to live in between. A seller rent-back can keep you in the house for a short period after closing.
• Contingent purchase. You make the new purchase depend on selling your home. Sellers often weigh it against non-contingent offers; our guide to home sale contingencies explains how it works.

1. Get a realistic value for your current home, since it sets the Prop 19 limit and your budget.
2. Talk to a lender about bridge or purchase financing before you shop.
3. Choose the order and write the timing into both contracts.
4. Put the two-year Prop 19 window and the three-year filing deadline on your calendar.
5. File the BOE-19-B claim once you have moved in.

If you are considering a continuing care community

A continuing care retirement community combines housing with services under a long-term contract regulated under California’s Health and Safety Code. Entrance fees can be large, so the timing of your home sale often follows the community’s move-in date.

Under Health and Safety Code section 1788.2, either party may cancel a continuing care contract without cause by written notice within 90 days of the resident’s initial occupancy. For a non-equity unit returned in substantially the same condition, the resident owes only a reasonable fee and the reasonable value of services received. Read the contract’s refund terms with your attorney before you commit the proceeds of your sale.

Prop 19 applies only to a replacement you own as your principal residence, so ask the assessor how it would treat the unit before counting on a tax-base transfer.

Preparing the house and the move

Long-held homes often need decisions about repairs, belongings and records. A pre-listing inspection shows what buyers will find, and you can then decide whether to repair, credit or sell as-is.

Gather permits, past inspection reports, receipts for improvements and your purchase documents early. Improvement receipts can raise your basis and lower taxable gain. Diamond’s concierge services can help coordinate preparation and moving logistics, some in-house and some through vendor partners. Diamond may refer you to partners we work with; you’re free to choose any provider.

If someone else will sign for you under a power of attorney, or the home is held in a trust, confirm the authority early. See selling with a power of attorney and selling a house in a trust.

This is general information, not legal or tax advice; talk to a California real estate attorney or tax adviser about your situation.

Questions people ask

Can I keep my Prop 13 tax base if I downsize?

If you are 55 or older, Proposition 19 lets you transfer your taxable value to a replacement primary residence anywhere in California, bought within two years before or after the sale, up to three times. A higher-value replacement adds the excess over the limit to the transferred value.

Do I pay capital gains tax when I sell my home to downsize?

Only on gain above the Section 121 exclusion, which is up to $250,000, or $500,000 for most married couples filing jointly, if you owned and lived in the home at least two of the last five years. Depreciation from any rental use is not excluded.

Can I use Prop 19 to move from Sonoma County to Napa or Marin?

Yes. The replacement can be in any California county; you file the claim with the assessor where the new home is located.

What makes a community legally “55 and over”?

In California, Civil Code section 51.3 sets the rules for senior citizen housing developments of at least 35 units. Federal law separately requires at least 80% of occupied units to have one occupant 55 or older, published age policies and occupancy verification.

Can I cancel a continuing care contract?

Yes, within 90 days of initial occupancy, by written notice and without cause, under Health and Safety Code section 1788.2, subject to the fees that section allows.

Should I sell first or buy first?

Buying first means one move but needs cash or a bridge loan, and the Prop 19 limit is 100% of your home’s value. Selling first gives you known proceeds and a 105% or 110% limit, but you need interim housing or a rent-back.

If you are planning a move from a long-held home, we can value the house, map the Prop 19 dates and coordinate the sale with your purchase. Learn how we sell homes in the North Bay or contact Diamond Real Estate Group.

Sources & notes

• California State Board of Equalization: Proposition 19
• Cornell Legal Information Institute: 26 U.S.C. 121
• Cornell Legal Information Institute: 26 U.S.C. 1014
• California Public Law: Civil Code section 51.3
• Cornell Legal Information Institute: 42 U.S.C. 3607
• California Public Law: Health and Safety Code section 1788.2

Last reviewed October 2026 by Matthew Martinez.