California Prop 60/90
If you’re a homeowner in California who is over the age of 55 and are looking for a way to reduce the amount of property taxes you’re required to pay for a new property, you may be in luck. Proposition 60 and Proposition 90 are two referendums that were initially created in 1986 and 1988 respectively. In California any new property you purchase is subject to a reappraisal, which creates a new tax value for you to pay, which could be dramatically higher than your previous property tax. As time passes, homes become more and more valuable. However, your property tax can only increase by a small amount each year, even if your home value increases dramatically. Unfortunately, this can make it difficult for seniors to purchase new homes, as the property taxes of the replacement home might be too high. The following is an in-depth look at California Prop 60/90 by The Bowen Team and how these laws can benefit you.
California Prop 60 and 90
Proposition 60 was the first of the two propositions designed to assist elderly homeowners in paying their property taxes. This specific proposition provides you with the means of transferring the current assessed value of your property to a new replacement property. As such, the property taxes you pay on the new home you purchase will be the exact same as your old house. If you qualify, it’s possible to save thousands of dollars.
Proposition 90 is basically an expansion of the rules set by Prop 60. One of the guidelines set by Prop 60 before the implementation of Prop 90 was that the transferal of the value of your current home could only be applied to a house in the same county. With Prop 90, you can now make these transfers from one county to another in the state of California. However, counties that allow transferal over county lines are required to pass an ordinance stating that they do. As of late 2014, there are only 10 counties that have passed such an ordinance, including San Bernardino, Santa Clara, San Diego, Ventura, San Mateo, El Dorado, Orange, Riverside, Alameda, Los Angeles. If you live in any other county throughout California, you’ll need to find a residence in the current county you live in to qualify for Prop 60.
In regards to the stipulation that the new home you purchase must be cheaper than the market value of the one you’re selling, there are some caveats. If the replacement property is purchased before sale of your current property, the price of the replacement property must be 100 percent or less of the market value of your current property. This percentage is the same if the property is purchased within two years of the sale of your current property. However, if the replacement is purchased within one year following the sale of your current property, the cost of this replacement property can be 105 percent or less of your current home’s market value. If you have any questions about how this works, just contact The Bowen Team so that we can help you.
How You Can Benefit From California Prop 60/90
The main benefit of Prop 60/90 is that you can potentially save thousands of dollars in property taxes. Let’s say that you initially purchased a home 20 years ago at a price of $150,000. If your tax rate at that time was 1.25%, you will have been required to pay $1,875 on an annual basis. Due to Proposition 13 in California, your property value can be raised by two percent or less annually. If the property value is indeed raised each year by two percent, you will pay around $2,625 this year. While the assessed value of your property can only be raised a certain percentage each year, it may actually be worth a lot more and sell for much more on the market.
If you sold this home for $400,000 and decided to purchase a new home for around $300,000, your new annual property taxes would typically be set to $3,750. With the usage of either Prop 60 or Prop 90 when purchasing a home in Coto de Caza, you can continue to pay $2,625 each year as opposed to the actual property tax of $3,750. It’s important to understand that this can only be used once for people above the age of 55. The only exception is in the event that this relief was initially acquired due to your age, but since that time you have become severely disabled. Proposition 110 allows you to request this relief in the event that you are forced to move due to the disability.
There are numerous qualifications and requirements that are necessary if you wish to qualify for the benefits of Prop 60/90. For instance, you or your spouse must be at least 55 years of age or older at the time of selling your home in order to qualify for these benefits. Additional requirements include:
- The replacement property must be built or purchased before the sale of your current home or within two years following the sale
- The replacement property will need to be your primary residence
- Both the original property and replacement property must be eligible for the disabled veterans exemption or homeowner’s exemption in order to qualify
- The filing deadline for these benefits is set to three years after the sale of your original property.
If you qualify for each of these requirements, there’s no reason that you shouldn’t file for Prop 60/90.
If you’re considering a move in the near future, stop by Coto de Caza, a luxury home community in Orange County, California that’s filled with stylish homes that you’re sure to love. Here at The Bowen Team, we look forward to helping you find the home of your dreams.