Oscar Castillo
"Residential" Real Estate

Tax Base Transfers - Prop 60 & Prop 90 California.. Oscar Castillo: Broker Associate (858) 775-1057

I find that a lot of Senior homeowners who are thinking of selling their home and buying another do know a little about or at least have heard of the California voter passed Propositions 60 (in 1986) and 90 (in 1988).

These 2-propositions 60/90 are in regards to “property tax base transfers”. But in most all cases, these particular senior homeowners are not informed enough and are missing the “rest of the picture”.

Yes, what these homeowners are wanting is for their current property tax base to transfer to the house they want to buy and/or have bought already. But there is some misunderstanding as to how this transfer can be accomplished.

So in order to have more clarity:  (1) the homeowner needs to know what is the age that qualifies them for these Proposition 60 and 90 programs, (2) which California Counties have enacted these two-propositions/ordinances to accept/authorize said tax base transfers and (3) in regards to monies to be spent and/or already spent, does the “purchase price/market value” of the replacement home qualify for the former home assessed tax base to be transferred to the replacement home?  

Overall, Proposition 60 and 90 are indeed property tax savings programs. Both are constitutional tax initiatives that allow tax exemptions to Senior citizens for the transfer of the “trended tax base value” of their former home to a replacement property.

We’ll get more into the “detail” as we go along, but for now here is a quick glance at the major components of Propositions 60 and 90 plus Eligibility Requirements and how does one qualify.

Homeowners must be of age 55 or older. For married couples: only one spouse must be at least 55 or more to qualify. Only once can a claim be filed for the “married couple”. Once you have filed and received this tax exemption relief, neither you nor your spouse can ever file again. This applies even if one of you was under-the-age of 55 at time of filing, upon your spouse's death or if the two of you divorce.

 As a person over the age of 55, you can only use/file for the benefits of Proposition 60 and 90 only once in a lifetime. However, there is one exception and that is via Proposition 110.

 The one exception to the “one time only” benefit rule is... if a person has filed and received relief for meeting the 55 of age requirement and subsequently became severely and permanently disabled after the date of the original claim and had to move because of the disability, then the base year value is allowed be transferred a 2nd time (Proposition 110)

 If an individual has been declared disabled - is receiving tax base relief benefits plus if at time of filing the claimant was and/is under the age of 55, then the “tax base transfer exemption” is not available in the reverse situation… meaning that, if a person receives the benefit due to his/her disability, then he or she cannot claim the tax exemption again once they reach the age of 55.

 If a Registered Domestic Partnership or a significant other own a home together, only one of the partners can be a claimant. As of now, a registered domestic partnership is not considered a “married couple”.  Therefore the registered domestic partner and/or the significant other, who did not file the original claim, can use his/her “one time only” claim/benefit later on in life.

 Homeowners must purchase or complete construction/build the replacement property within 2-years after selling their former home or sell their former residence within 2-years after purchasing or complete construction/build the replacement property.

 Both the former and replacement properties must be for the purpose of being the owner’s “primary/principle residence” and must be eligible for the homeowners' exemption or Disabled Veterans exemption.

 The market value of the replacement home as of the date of purchase and/or the completed date of construction (that is if you plan to build or have built already), must be “equal to or lesser than” the market value of the former home on its date of sale.

The following is valuable information and consists of answers to questions that arise relative to Tax Base Transfers:

1) What does “trended tax base value” mean in regards to my home?

Upon buying your home, the purchase price and/or the appraised value is the “tax base value” (also known as the “assessed value”) for that year of purchase. Your annual property taxes, for that 1st year, will be the percentage of your local property tax rate multiplied by your tax base/assessed value.

Not trying to confuse you here:  But let’s say, if the market value of your home went up 7% in the first year of purchase. By statute, the California Proposition 13 allows your County to apply a maximum of an annual 2% increase to the tax base/assessed value.

Any applied dollar amount by means of the Proposition 13 percentage increase plus the tax base/assessed value now becomes the trended tax base value for your 2nd year. From this point forward any additional annual Proposition 13 percentage increases (or zero) to an ongoing trended/assessed value will become the “running” new trended/assessed tax base value amount. FYI, you will see that most people speak of it and recognize it simply as the “property tax base/assessed value”.

Here, it is important to know that it is the “trended tax base/assessed value”, not the market value, is what Proposition 60 & 90 will allow a homeowner to transfer and have it be their new tax base on their replacement home.  

2) What are the California Counties that have enacted both Propositions 60 and 90 initiatives and ordinances to accept/authorize property trended tax base transfers?

As of this writing, there are 11-Counties:

 Alameda           Orange       San Diego 

 Tuolumne         Ventura       El Dorado

 Riverside          San Mateo

 Los Angeles     San Bernardino

  and Santa Clara

3) What is the difference between Proposition 60 and Proposition 90?

Proposition # 60 relates to the trended tax base transfer within the same County (Intra-County).

Proposition # 90 allows the trended tax base transfer from one County to another County (Inter-County). The location of your former residence does not have to be in one of the 11-Counties listed above, but the replacement home needs to be in order to qualify.

There is some Counties that have enacted only Proposition 60 and have not yet adopted Proposition 90 or vice-versa. So since each County is subject to change/differences, it is recommend that you contact the County Assessor in which your future replacement home is to be located.

4) What does "equal or lesser value” mean in regards to a replacement home?

For simplicity: The market value of your new replacement home as of the date of purchase must be “equal to or lesser than” the market value of your former/original home on the date of its sale.

But what if you plan to build or already have built the replacement home?  Then the “date of completion/newly constructed” is the date in which the 2-year period is to be applied. In this scenario, the former/original home will now have to be sold within 2-years after the completion of the replacement home. The "completion date" of a newly constructed replacement home is the date in which the General Contractor has fulfilled all the contractual obligations or when the home has been inspected and approved for occupancy by the Local Building Department.

Note: What will be applied here in regards to the market value of the replacement home is that it has to be....  100%  or less of the market value of the former/original home if the replacement home was purchased or newly constructed prior to the sale of the former/original home.

What if the former/original home is sold before the new replacement construction is completed?  Then that replacement home must be completed/constructed within 2-years as of the date-of-sale of the former/original home in order to qualify.  

But in this case, what needs to be factored in is home market value increases (if any) during the time it takes for the homeowner to construct/build a new home after the sale of the former/original residence. So in the scenario of price increases, the “equal to or lesser than market value criteria” is interpreted as:

 105%  or less of the market value of the former/original home if the replacement home was purchased or newly constructed within the first year after the sale of the former/original home, or

• 110%  or less of the market value of the former/original home if the replacement home was purchased or newly constructed within 2-years after the sale of the former/original home.

5) Is there any extension of the 2-year period after I sell my home if construction on my new/replacement home is delayed due to unforeseen circumstances that are beyond my control?

Regardless of the reason for the delay, if the new construction is not completed within the mandated 2-year period, the home will not qualify for proposition 60 or 90 tax relief. Currently there is no provision for exceptions due to hardship or other factors which may have prevented compliance with the 2-year time period from the date of sale of the former/original property.

6) Would I still qualify for Proposition 60/90 benefits if I was a few months away of age 55 when my former home sold, but was over 55 when I purchased my replacement property?

No, you must be at least 55 when your original/former home sells. While you may be 54 or over 55 when you purchase and/or complete the construction of your replacement property… the key here is that you must be at least 55 when you sell your original/former home.

7) How do I go about filing for Prop 60 or Prop 90 tax relief?

You should file an application with the County Assessor where the replacement home is to be located. You must file the claim within 3-years after both transactions are completed. That is (1) the sale of former/original home and (2) the purchase and/or completed construction of the replacement home.

It does not matter which of the two transactions took place first. But what must be understood is that the latter date of the two is when the 3-year filing period starts.

 It is important that you do not confuse the 3-year period to file a claim with the 2-year period for the homeowner to purchase or complete construction/build the replacement property after selling the former home or sell their former residence within 2-years after purchasing or complete construction/build the replacement property.

Note:  In determining whether the "equal to or lesser than market value” test is met or not, it is important for the homeowner to know that the market value of a home is not necessarily the same as the sale or purchase price… For purposes of qualifying for Propositions 60 or 90, your local County Assessor’s office will determine the market value of each home involved. Both the former/original home and the replacement home may be subject to          re-appraisal.

*Here is the link to the list of all California County Assessors offices.

If you are thinking of Selling your home and if you have any questions in regards to "transfering" your current Tax Base to your new/replacement home...feel free to contact me any time.

Always know that I will certainly make it a point to make myself available for you. I can answer your questions in a matter of minutes and it would be my pleasure to do so.

Oscar Castillo :  Broker Associate (San Diego, CA)

(858) 775-1057

Oscar Castillo - Broker Associate REALTOR- San Diego

 

- Residential Brokerage

 

Oscar@OscarSellsHomes.com

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