If you are over the age of 55 and thinking about moving, consider this: you may be able to take your low property taxes with you to your new home.
Thanks to Proposition 13, which was passed by California voters in 1978, real estate in California is no longer reassessed at its fair market value for property tax purposes every year. Reassessment only occurs when the property changes ownership. Prop. 13 limits the annual reassessment of property to 2%, regardless of how much the property’s value has actually increased. What this means for many long-term homeowners, especially in the Bay Area, is their property taxes are significantly lower than they would be if they were to purchase the identical home today.
All of that is great, as long as you plan on living in that same home. However, for many people over age 55, the home where they raised their children is now bigger than they need or has more yardwork and other upkeep than they want to handle anymore, and they are interested in downsizing. And downsizing would be the perfect solution as long as it didn’t mean their property taxes would double or triple (or more).
Enter Propositions 60 and 90, which allow us to take our low property tax assessments with us to our new homes. This can apply any time you move within the same county or if you move to one of the ten counties that have authorized intercounty transfers: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura.
In order to qualify, the following must be true:
- You or your spouse who lives with you must be at least 55 when the original property is sold.
- The original property and the replacement property must be your principal residence (not a rental property or a vacation home).
- The fair market value of the replacement property must be equal to or less than the fair market value of the original property when it is sold. The fair market value is not necessarily the sale price.
- The replacement property must be purchased within two years of the sale of the original property.
Some other points to keep in mind:
- This is a once in a lifetime deal. Neither you nor your spouse can ever do this again, even if you divorce, even if one of you dies.
- For this to apply, the original property must be eligible for a full reassessment after it is sold. This means you cannot sell it to one of your children and let them claim the Parent/Child Exclusion from reassessment.
[Ad] Do you need help with your California estate planning now? We can help. Together our Absolute Trust Counsel team will take a look at your situation and your specific needs to develop a strategic plan to help protect you and your loved ones. Here’s a link to schedule your free discovery today > https://absolutetrustcounsel.com/scheduling/.
Our Absolute Trust Counsel team would love to offer all of you access to ATC’s Incapacity Planning resource page on https://absolutetrustcounsel.com/incapacity-planning/ We’ve collected our top planning information all in one place so listeners can find videos, guidebooks, blog posts, a host of information with tips and strategies on implementing, planning, and protecting themselves and their loved ones.
