real estate taxes

Can I take my low property tax basis with me when I move?

Property Taxes

Have you ever considered moving or downsizing, and been concerned about how property taxes could impact your finances? Is it possible to keep your low property tax basis and move it to the next house? The answer is yes, as long as you meet certain criteria. Proposition 60 is a California constitutional amendment that allows you to transfer the base year value of your current primary residence to a newly purchased primary residence in the same county for those 55 and over.

Why is this significant and how can you benefit?

First, let’s consider Proposition 13. Proposition 13 protects buyers from large increases in property taxes by setting a base year value on your property. If purchased before 1975, the base year value of a property is set for its assessed value in 1975. If the property was purchased after 1975, the base year value is set by the market value of the property at the time of purchase or change of ownership. Proposition 13 allows only a maximum increase of taxable value by 2% each year.

Proposition 60 is an intra-county amendment (in other words, moving within the same county), and it builds on Proposition 13. It allows for people age 55 and older to transfer their base year value to a newly purchased home as long as the new home will be their primary residence. This is meant to prevent a shocking increase in property taxes and work as an incentive for people 55 and older to be able to move or downsize in what is most likely a very different housing market than when they originally purchased.

But what if you want to move to a different county? That’s where Proposition 90 comes in. It is an inter-county amendment and it’s got you covered if the counties you are moving from and to are listed below:

Alameda, Los Angeles, Orange, Riverside, San Bernadino, San Diego, San Mateo, Santa Clara, Ventura, and Tuolumne

For Propositions 60 and 90, the transfer of the base year value must happen within a two-year period. This means that the homeowner must sell and buy a new residence within a two-year period. The replacement property that is purchased must adhere to the “equal or less than” current value rule. This limits the current value of the replacement home to be equal to or less than the current value of the former residence.

If you are thinking of doing a property exchange through Prop 60 or 90, there is additional in-depth information on the FAQ page on the California Board of Equalization’s website.

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Disclaimer: This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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