Take Your Tax Base When You Move

How Propositions 60 and 90 benefit adults 55 and over

The Senior Citizen's Replacement Dwelling Benefit, better known as Propositions 60 and 90, can offer substantial tax savings to qualifying Los Angeles home buyers. The two constitutional initiatives, passed by California voters in 1986 and 1988 respectively, allow certain home owners to transfer the “trended base value” of the home they are selling – also known as the adjusted Proposition 13 value – to a new home of equal or lesser value.

Already confused? Here are a few details:

• Proposition 13, passed in 1978, sought tax relief for homeowners by limiting the assessed value of existing homes to 1975-1976 values, limited tax rates to one percent of assessed value (plus any voter-approved surcharges), and limited inflation-based increases to two percent annually.
• This means that the trended base value of a home is its original base year value (usually the full market value for the year the home was purchased) adjusted by the annual inflation factor for each taxable year under the current ownership.
• So, while a home’s current market value may skyrocket, its Prop 13 value can stay relatively low – a potential difference of hundreds of thousands of dollars.
• When a property sells, its selling price become its new tax base, so the buyers typically pay much more in taxes than the sellers did.
• Proposition 60 allows qualifying home sellers age 55 and older to transfer the trended base value from their current home to their new home within the same county. Prop 90 extends the benefits of Prop 60 to home sellers/buyers transferring between certain California counties. This means that the buyers will pay about the same taxes in their new home as they paid in their old home – potentially an enormous tax savings to these home buyers.

Here are some additional details about qualifying for Propositions 60 and 90:

• Both the original home and the new home must be your primary residence.
• Qualifying properties include condominiums, single family houses, units in planned developments, cooperative housing, community apartments, mobile homes subject to local real property tax, and living units within a larger structures consisting of both residential and non-residential accommodations.
• According to the Los Angeles County Assessor: “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 residence, even if the owner of the original property acquires only a partial interest in the replacement residence. Owners of two qualifying original residences may not combine the values of those properties in order to qualify for a Proposition 60 base-year transfer to a replacement residence of greater value than the more valuable of the two original residences.”
• Again, according to the Los Angeles County Assessor, “equal or lesser” can change, depending on when the new property is purchased. In general, it means “100% or less of the market value of the original property if a replacement property were purchased or newly constructed before the sale of the original property, or 105% or less of the market value of the original property if a replacement property were purchased or newly constructed within the first year after the sale of the original property, or 110% or less of the market value of the original property if a replacement property were purchased or newly constructed within the second year after the sale of the original property. If the market value of your replacement dwelling exceeds the ‘equal or lesser value’ test, no relief is available. It is ‘all or nothing’ with no partial benefits granted.” The market value determination is made by the Assessor.
• The replacement property can be an existing residence or one that is planned or under construction – but it must be purchased or completed within two years of the sale of the original property. The claim for tax relief must be filed within three years of the purchase/completion of the replacement property.
• You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
• Both the current and the replacement properties must be eligible for the Homeowners’ Exemption or Disabled Veterans' Exemption at the time of sale. (Homeowners must file for these exemptions; they are not granted automatically.)
• This is a once-in-a-lifetime benefit. Neither spouse may ever apply again. Furthermore, if the original property has multiple owners, only one of the owners may claim the benefit on that property.
• Certain counties in California have ordinances that enable Proposition 90 tax relief. In addition to Los Angeles County, they are: Alameda, Orange, San Diego, San Mateo, Santa Clara, and Ventura. This list can change, so if you are moving out of Los Angeles County, be sure to verify eligibility with your new county.
• · Application forms are available at the Assessor’s office in person, by calling 213.893.1239, or online. Go to http://assessor.lacounty.gov/extranet/list/forms.aspx and click on Claim of Person(s) at Least 55 Years of Age for Transfer of Base-Year Value to Replacement Dwelling - Intracounty (Proposition 60) and Intercounty (Proposition 90), When Applicable BOE-60-AH, OWN-89 to upload the form.

If you have additional questions about Props 60 and 90, or if you are ready to talk with a Westside specialist and get your house seen and sold, contact Coco Clayman-Cook today at Coco@WestsideLifestyles.com or 310-278-6033.

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