Empty Nester? Downsizing? Retiring? Maintain Low Property Taxes with Prop 60 / 90
Are you finally an empty nester? Has your home outgrown you? Does the idea of moving and potentially saving hundreds to thousands a month sound ideal to you?
If you’re over 55 and considering a move from your current home to another home in California… then you need to be aware of the unique tax relief benefits state law provides when you move.
Here is a Short Overview of what you want to know!
Downsize (or “rightsize”) into the best home for your lifestyle…
Move closer to your kids, and grandkids
Build the home of your dreams!
Escape the maintenance trap—or the two-story home with stairs…
Move closer to the beach—without paying “beach home” taxes…
Reduce the position of real estate in your overall wealth portfolio…
Use the savings to take much needed vacations
Move closer to friends!!
Propositions 60 & 90 were designed to offset the effects of Proposition 13 which causes a reassessment at market value when the home is sold, and therefore results in additional taxes. No matter How LOW your taxes currently are!
Can you give me an example of what you are talking about?
For the sake of example, let’s say your current home has an assessed value of $325,000 and our tax bill is $4,063 per year, or 1.25%.
Then, If you were to sell your home for $800,000 and buy your new dream home for, say, $725,000, your property tax bill, without using the benefits of 60/90 would rise accordingly to reflect the higher value of your new home. At 1.25%, your annual bill would jump to $9,063. Please note that these calculations reflect a simplified example of how this tax relief can work and are for illustrative purposes only. They are not a reflection of any actual tax bill.
This is where the Propositions 60/90 comes in: if you’re eligible to transfer your current property tax rate, you’ll be able to move without increasing your property tax bill at all. It would remain at $4,063 a year. Giving you substantial savings!
Read on to learn more about this special tax relief and whether it might be right for you, then give us a call, so we can help you Sell your current home, and find your Next Dream Home!
In the 1970s, Southern California real estate prices began to increase at such a rapid pace that many residents—especially those on a fixed income—were not be able to keep up with their increasing property taxes, which are based on the assessed market value of their homes. In 1978, California voters acted to place a limit on the rate at which counties could increase property taxes on homeowners.
A Cap on Tax Increases (Prop. 13)
Officially called the “People’s Initiative to Limit Property Taxation,” this amendment to the Constitution of California restricted the increases in property tax bases (originally 1.25% of the home value) to a number not to exceed 2% annually, roughly tracking the rate of inflation, according to the Consumer Price Index. The only time property taxes could increase beyond that 2%, was if the property changed hands or if a new addition or renovation affected the home value. An unintended consequence of this relief was that many homeowners benefiting from it felt they were “locked into” their homes, or at least strongly incentive away from the natural cycle of real estate: “down-sizing” to a more suitable home once the kids are out of the house… and certainly before a large, two story house with lots of stairs becomes a maintenance and safety concern.
For many empty-nesters and retirees, a move to another home would mean a much higher tax bill… so instead, they lived in homes much larger than they needed, and kept new and growing families from being able to move into them.
To correct for these negative side-effects, two additional measures have been enacted to supplement Proposition 13.
Proposition 13, the “People’s Initiative to Limit Property Taxation,” solves the problem of skyrocketing home values leaving owners unable to afford property taxes.
Proposition 60 allows homeowners to move into a more suitable home within the same county—without losing their affordable property tax base.
Proposition 90 extends the same tax base transfer benefits of Proposition 60, to people moving between two counties.
Allowing Tax Bases to Move With Homeowners (CA Props. 60 & 90)
Proposition 60, passed in 1986, allows homeowners over the age of 55 to transfer the assessed value of their primary place of residence to a replacement primary place of residence within the same county.
The replacement home must be of equal or lesser value than the original home, and it must be purchased or built within two years of the sale date of the original home. In most cases, “equal or lesser value” means 100% of the market value of the original property if the replacement home is purchased before the original home is sold; or 105% of the market value of an original home, if the replacement home is purchased within one year after the sale of the original home; or 110% of the market value of the original home if the replacement home is purchased within the second year after the sale of the original home.
Proposition 90 extends the same tax base transfer option created by Proposition 60, across county lines (for those counties that have passed ordinances to participate).
Note: Proposition 60 tax relief benefits are available to any California resident by state law, but Proposition 90 requires your new county’s participation. Not all counties participate.
As of June 5, 2015 there are ten counties that accept intercounty transfers:
*We recommend contacting the county you wish to move to and verify eligibility.*
What’s the Logic?
These constitutional tax incentives allow individuals 55 and Over to transfer the base value of their current home to a replacement property resulting in substantial tax savings. One other benefit is that you do not necessarily have to downsize. Let’s just say for example, a couple living in a condo worth one million dollars in San Diego, can purchase a single family home in Ventura if their preference is to retire in a more traditional style home. One other advantage is that you can make improvements to your new home receiving the same tax relief as long as your improvements do not exceed the market value of the original property. Follow in the steps of the thousands of seniors that are taking advantage of this tax relief today.
Requirements for Proposition 60
You or your spouse must be 55 years or older when the principal residence is sold.
Original and replacement property must be in the same county.
You can only transfer once in a lifetime. The one exception is if you become severely or permanently disabled and your disability requires you to move to another home
The replacement property must be of equal or lessor value than the original property sold.
The principal and replacement property must be your primary residence, and not buying a second home.
Must be eligible for the homeowner’s exemption or disabled veteran’s exemption.
Requirements for Proposition 90
Same qualifications as Prop 60 except under Prop 90 you can transfer to a different county.
As of June 5, 2015 there are ten counties that accept inter county transfers:
The “fair market value” of both homes is crucial in qualifying for CA Props 60 & 90 benefits. Usually the sale or purchase price on an open market (including real estate fees) is accepted by the assessor as the fair market value, but there are cases in which a price is determined by the appraiser in the assessor’s office to be above or below market value. (If this is a concern for you, then we would be happy to help you navigate and help direct you through it all)
Call us to review these Questions together -
I sold my house a year ago and moved out of state. Now I want to move back. Can I still qualify for CA Props 60 & 90?
I am purchasing a new home, and I plan to rent it out before remodeling and moving in. I plan to sell my original home just before I move in. Will I qualify?
Will I qualify if I rent out my home for one year, and sell it to buy a new home?
My spouse and I divorcing and plan to sell our home. Which of us can transfer the tax base to his or her next home?
I bought a vacant lot 10 years ago. I want to sell my home now and build on that lot. Would I qualify for CA Props 60 & 90?
“This is amazing.. so what do I do now? "
If the steps ahead seem complicated, you’re not alone: most people who decide to take advantage of CA Props 60 & 90 have not yet decided where they will go next, or how to coordinate all the moving parts, and they need the help of someone who understands the process. In fact, many are not taking advantage of these initiatives.
We have a simple and painless process to help you work through the decisions you will need to make, while we guide you through the decision making.
LET US HELP!
It's crucial to determine whether this benefit works for your particular situation! We can discuss this and more at a complimentary appointment. As San Diego 60/90 Real Estate Experts, we can give you a review and make suggestions based on your retirement objectives and set a clear path of action!
Let us help you stay on top of the key issues and make a plan that can help you reach your personal retirement real estate goals.
Brad and Karen Mattonen
North County Home Pros
Also feel free to contact our 60/90 Mortgage Expert
BERJ ARAKELIAN CME,CMPS
RETAIL BRANCH MANAGER
11622 El Camino Real #100, San Diego CA
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Frequently asked questions about 60/90: http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm
Guide to 60/90: https://www.besmartee.com/blog/california-proposition-60-and-90-your-complete-guide
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