TRANSFERRING TAX BASE FOR OVER-55 BUYERS CAN SAVE LOTS OF MONEY

Knowing the tax laws can allow homebuyers and the Realtors® that assist them to make a move confidently and to save lots of money. California Propositions 13, 60, and 90 can positively affect people over 55 years of age.

Proposition 13:

Under Proposition 13, the value of a home, for property tax purposes, is reassessed to the new market level (the new purchase price) whenever a change in ownership occurs. This usually results in higher property taxes.

Prop 60:

Proposition 60 allows a transfer of base-year value of the principal residence sold of a senior citizen (55 and older) to a replacement dwelling of equal or lesser value within the same county.

Prop 90:

Proposition 90, enacted in the November of 1988 in California, and otherwise known as the “local option law”, provides an avenue for property tax relief to owners 55 and older who sell their principal residence and purchase a replacement home of equal or lesser value in another county.

The County Assessors will require a copy of the tax bill from the other county and a copy of the applicant’s birth certificate to be included with the application. Also, include a copy of the grant deed for the new purchase and a copy of the closing statements of both sale and purchase.

SUMMARY OF ELIGIBILITY REQUIREMENTS:

The seller of the original residence, or a spouse residing with the seller, 55 years of age or older, as of the date that the original property is transferred.

The replacement property must be of equal or lesser “current market value” than the original.

The tax base year of the original property cannot be transferred to the replacement dwelling until the original property is sold, BUT (and this is the cool part) the replacement property must be purchased or newly constructed within two years (BEFORE OR AFTER) of the sale of the original property. This allows the property owner to take advantage of a low market, like the one we’re in, and sell when things are selling more briskly or vice versa. This just means that the homeowner will be taxed on the new property at the assessed rate until the sale is made on the original property and the proper paperwork is filed with the county. The owner must file an application within three years following the purchase date or new construction completion date of the replacement property.

This is a one-time-only filing. Proposition 60/90 relief cannot be granted if the claimant, or spouse, was granted relief in the past.

Proposition 60/90 relief includes (but is not limited to): single family residences, condominiums, units in planned unit developments, cooperative housing, corporation units or lots, community apartment units, mobile homes subject to local real property tax, and owner’s living premises which are a portion of a larger structure.

The taxpayer is not eligible for the tax relief until they actually own AND occupy the replacement dwelling as their principle residence.

If the buyer is moving to another county, it is essential that you call the co-operating County in question, to verify that they are currently accepting the value transfer under Proposition 90, and what their requirements are. If you have any questions, the property tax office in Sacramento for all counties in California may be reached at (916) 445-4982.