Understanding California law in relation to your property taxes is critical to obtaining its available benefits. I find that there is generally much confusion surrounding application of Prop 13, and it is a question best raised with your tax consultant. Since it does impact my clients’ real estate decisions, I make it my business to understand and assist with the issue. Here’s what I know, but don’t skip the consult with your tax professional.
“Prop 13” is the beloved California tax break for homeowners, allowing you to generally keep your property taxes low, based on the property value at time of purchase, only rising up to 2% per year, regardless of spikes in value. There are some exceptions to this, including reassessments for remodel, partial transfers, and ballot measures that add to your property tax bill. However, with a relatively stable property tax bill, you don’t have to worry about your home’s appreciation and rising tax bills pricing you out of affording your own home. For owners who purchased their homes for a fraction of todays’ values, this benefit cannot be overstated. The reassessment of the property tax based on current market values occurs only upon sale of the property. Great for the homeowner staying in place, but what about the homeowner who wants to downsize? Can they afford to?
In many cases, yes. However, the answer does not lie within Prop 13, but in Props 60 & 90, passed in the 1980s for just this reason.
Proposition 60 allows a senior citizen, once in their lifetime, to replace their existing property with one of equal or lesser value, and retain their Prop 13 property tax basis. To qualify for this benefit, you or your spouse must be at least 55 years of age upon sale of your principal residence, the new residence must also be your principal residence (and qualify for a homeowner’s exemption or disabled veteran’s exemption), and here’s the catch- both homes must be in the same county.
Proposition 90 is a key supplementary provision, allowing you to use the same rules of Prop 60, but to buy and sell in different counties. The counties currently participating are Alameda, San Diego, El Dorado, Riverside, San Mateo, Ventura, Los Angeles, San Bernardino, Santa Clara, Tuolomne and Orange. This is so important, especially for our local Westside residents who look to neighboring counties to downsize and reduce their cost of living.
Even better, there is a bill currently proposed by the California Association of Realtors to expand Prop 13. If passed, senior or disabled homeowners would be permitted to transfer their existing Prop 13 assessed value to a new home anywhere within California, regardless of purchase price, and as often as they choose. This is important, not just to seniors, but to potential new home buyers, as it will allow seniors to sell their homes without this tax penalty, freeing up some much needed inventory. Please watch your voter ballots for this if it comes for vote, and don’t forget to consult your tax professional for more information!
Disclaimer: This article is intended to be primarily for entertainment purposes, and is not to be considered legal advice.
ABOUT LISA PHILLIPS, ESQ / CA Bureau of Real Estate Lic# 01189413
Lisa Phillips is an active Realtor in the Los Angeles area, with more than twenty years as a practicing real estate broker and attorney. Her unparalleled knowledge of real estate, from local markets and pricing to legal issues and deal-making, has made her a trusted and valuable asset to her clients. In addition to her real estate and business savvy, Lisa is passionate about helping others, and works tirelessly to achieve the best results for her clients. For more information, please visit http://www.LisaPhillipsRealEstate.comwww.LisaPhillipsRealEstate.com
