Also, I didn't take the following path myself -- but in hindsight, I should have!
I got to thinking the other day, for anyone fortunate enough to be pushing up against the potential capital gains cap on the sale of their primary residence ($250K for single individuals, or $500K for married couples) and who are also over 55 years of age -- there's a possible tax avoidance strategy that you may want to consider. And if the two lines cross (age and capital gain maximum) then you can maximize the impact.
When you reach 56 years of age (i.e. are over the age of 55), you are allowed to sell your home and purchase another, within California, and maintain your current property tax base (Prop 19 -- essentially replaces Prop 60 and Prop 90). Likewise, if you're married, and have lived in your home for 2 of the past 5 years, you can take up to $500K in capital gains free of capital gains tax (regardless of age). I've always considered these items separately but hadn't really thought of utilizing them at the same time.
For example, if one paid $500K for their home a number of years ago, and it's worth $1,000,000 when they turn 56 years of age, they could sell it for $1M, and then purchase a replacement property within California, also for $1M (just to keep the example simple). So, what has been accomplished, other than one having to make a lateral move? Two things:
a) the property tax on your new house will be about the same as with the old house -- about $6,000/year (vs $11K/year or thereabouts which would be the approximate standard rate for a new home purchase of $1M)
b) your basis in the new house would be $1,000,000. So, if you were to sell the new house a few years later for another gain -- let's say it sells for $1,100,000 -- you would have no capital gains tax to pay (and for a married couple that number could be as high as $1,500,000). If you had remained in your old house and sold it for $1,100,00 you would have a potential taxable capital gain of $100K. and if you waited until the former house was worth $1,500,000 you would be looking at a potential taxable capital gain of $500K -- that's real money ($100K assuming a 20% capital gains rate, and ordinary California income tax on top of that!).
Note that the examples above are simplified, and don't consider capital improvements, cost of sale, and pre-sale improvements, all of which can be utilized to increase one's basis - but the concept is the same.
Just a thought for those over 55 (or nearing that age)!