Calculating California’s homestead reveals the homestead in 2022 is now capped at $626,400.
That’s even more generous than the originally enacted $600,000. And it will change next year.
To calculated the current homestead exemption, you need an armful of data (and a bit of math).
Because, the new law provided not only for a bigger homestead but also for annual adjustments to the floor and the cap. We walk through the new homestead law and crunch the numbers.
The homestead as adjusted
CCP 704.730(b) reads
The amounts specified in this section shall adjust annually for inflation, beginning on January 1, 2022 based on the change in the annual California Consumer Price Index for All Urban Consumers for the prior fiscal year published by the Department of Industrial Relations.
But it appears that we are left to do that calculation ourselves, so let’s do it. We’ll need to do it again, each January.
We need to know
- What is the California fiscal year; and
- Where is the correct Consumer Price Index found.
California fiscal year
The state’s fiscal year runs from July through June. So the “prior fiscal year” ends the previous June, at any time you do the calculation.
Consumer Price Index for All Urban Consumers
The next piece you need is the change in the Consumer Price Index.
The CA Department of Industrial Relations posts the CPI at several places. This link takes you to a table showing the bi monthly CPI from the present back to 1955.
Find the figure for the end of the fiscal year in the previous June and the June just prior to that for All Urban Consumers. In June 2021, the CPI was 297.447; in June 2020, the CPI was 284.835. The difference, 12.612, is divided by the earlier CPI number (284.835), giving us an adjustment of 4.427%.
Calculate the homestead change
Both the floor and the ceiling of the homestead get adjusted. Using an increase of 4.4%, the cap on the exemption becomes $626,400 (600,000 *1.044) and the floor becomes $313,200 (300,000*1.044). And so you have the 2022 California homestead amount.
But to apply the floor and the cap, you need more data.
The “median price of homes” puzzle piece
Determining where a homeowner’s exemption falls between the floor and the ceiling is less certain because the statute does not provide for a definitive source of median home prices by county. The best resource currently available appears to be the CAR’s report on sales of existing detached homes.
This piece is based on the meticulous legwork of Norma Hammes, San Jose bankruptcy lawyer, who tracked down all the data points and explained what to do with that data.