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In California, Prop 13 famously keeps your property tax low, making it potentially an expensive move to sell a home you’ve had for years for a new home, which will be taxed at the current fair market value. But for seniors over 55, Propositions 60 and 90 allow you to take your old home’s tax value with you to your new home.
Proposition 60 lets you buy a new home of equal or lesser value in the same county, and keep your current tax bill. Proposition 90 lets counties decide if they will accept transfers from another county. Locally, El Dorado County is the only county that accepts transfers from other counties. (A complete list of counties allowing property tax transfers in is available here.) If you buy and sell inside Sacramento County, however, you’ll still be covered by Proposition 60.
In order to qualify for the transfer you’ll need to meet a few key qualifications:
1. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
2. The replacement property must be your principal residence and must be eligible for the homeowners’ exemption or disabled veterans’ exemption.
3. 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.
4. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
5. 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.
6. 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.
There are two other “wrinkles” to watch out for.
First, when you sell, the property must be subject to reappraisal unless the buyer qualifies for relief under a disaster or disability exception. This means that a sale to a child that doesn’t trigger a reappraisal of the new property won’t qualify for the transfer. Second, this is a one-time benefit, meaning once you transfer your tax basis to the new property, don’t expect to be able to do it again.
For those of you who hold your home in a trust (and if you don’t currently, why not?) as long as you are the present beneficiary of your trust, you will qualify for the transfer.
If you are looking to downsize, see if Propositions 60 and 90 take the property tax worry out of the equation for you.
For more information about Propositions 60 and 90, see the excellent resource on the California Board of Equalizations website here.