Proposition 60/90: Advantage for the 55+ Years in Buying Their Next Suitable Home.
Propositions 60 and 90 are constitutional amendments passed by California voters that provides property tax relief for persons aged 55 and over. The intent of the propositions is to allow senior citizens to transfer their low property tax base if they purchase a home of equal or lesser value (in other words move down into a smaller home). The property sold must be located in one of the 7 counties currently part of the program (as always, this is subject to change).
Prop 60 allows transfer of the property tax rate if you purchase within the same county (provided that county participates). Prop 90 allows you to sell your property in a participating county, and purchase a replacement property in any of the 7 counties that participate in the program, to date these are: Alameda, Orange, Los Angeles, San Diego, San Mateo, Ventura and Santa Clara.
Perfect example: You bought a property in 1988 in Sunnyvale for $185,000 (Santa Clara County). You sell it this year for $1,200,000. You can buy a new, more suitable home in Los Angeles County for $450,000 and transfer you low property tax base to your new home.
The seller or the spouse must be 55 or older as of the date of sale of the original property. They both do not have to be 55, only one of them. It is a one-time only benefit. The only possible exception is if you become disabled. You may qualify under Prop.110.
In order to qualify, your replacement property must meet these criteria:
- You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
- The replacement property must be your principal residence and must be eligible for the homeowners’ exemption or disabled veterans’ exemption.
- The replacement property must be of equal or lesser “current market value” than the original property. The “equal or lesser” test is applied to the entire replacement property, even if the owner of the original property purchases only a partial interest in the replacement property. Owners of two qualifying original properties may not combine the values of those properties in order to qualify for a Proposition 60 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.
- The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
- To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase date or new construction completion date of the replacement property.
- Your original property must have been eligible for the homeowners’ or disabled veterans’ exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.
The market value of the replacement property as of the date of purchase must be equal or less than the market value of the original property on the date of sale. The meaning of “equal or lesser value” depends on when you purchase the replacement property. In general, equal or lesser value means:
- 100% or less of the market value of the original property if a replacement property were purchased or newly constructed before the sale of the original property, or
- 105% or less of the market value of the original property if a replacement property were purchased or newly constructed within the first year after the sale of the original property, or
- 110% or less of the market value of the original property if a replacement property were purchased or newly constructed within the second year after the sale of the original property.
In determining whether the “equal or lesser value” test is met, it is important to understand that the market value of a property is not necessarily the same as the sale or purchase price. The assessor will determine the market value of each property. If the market value of your replacement dwelling exceeds the “equal or lesser value” test, no relief is available.
As always, there are many exemptions, exclusions, qualifications, and special circumstances. You should always verify your circumstances with the Assessor’s Office of the county you are interested in moving to. You can find more detailed information on Prop 60 & Prop 90 by visiting the California State Board of Equalization web site where most of the facts in this article was taken. Of course, it is best to consult with your licensed tax preparer before you execute this strategy.
There are a lot of Filipino professionals who are moving from the Bay Area moving to El Dorado County, Los Angeles and San Diego as a retirement strategy enjoying the equity they built on their present home and enjoying a high quality lifestyle. As each one has a unique situation, one has to call the county they plan to move to file an application.
Espie Agbayani, CRS CIPS TRC