If you or your spouse are 55 years old or more and have owned your home for a number of years you will want to read this post. Propositions 60 and 90 were designed for people who are ready to downsize. To fully understand the benefits of these propositions, we must first understand how property tax works in the state of California.
In California proposition 13 stipulates that a person’s tax base is based on whatever price it was they purchased the property times the tax base for that particular area. So if you purchased your house 20 years ago in the Montclair district of Oakland where the valorem tax rate is .01327 for, lets just say for example, for $40,000 then you total tax bill for the year would be $530.80 plus any supplemental taxes that this particular address might be subject to. A house I just sold in Montclair had special assessment non-valorem taxes of $748.00 per year. So if this was the house in question your total tax bill for the year would be $1,278.80. If that house sold in today’s market it would be worth $690,000. So the valorem tax would be now $9,156.30 per year plus the $748 for a total property tax of $9,904.30 per year.
Because property values have gone up so much over the years, this made it difficult for people wanting to downsize because their taxes would increase so much if they lost their current tax base and had to pay it based on today’s prices. Therefore a constitutional amendment was added in the 1980’s regarding proposition 60.
Proposition 60
Proposition 60 was passed around 1986 by the state voters which allows seniors to keep their property tax base assessment when they move within the same county. The rules are that you or your spouse must be 55 years or older, you can only take advantage of this one time, and you must buy something equal to or less than the value of the sold property. You have up to 2 years after selling your home to transfer the tax base to a new property. The property you sold and the property you buy must be your principle place of residence. If you do not purchase the property until the first year after you sold then you can buy something up to 105% of the value of the home you sold. If it is in the second year after you sold that you buy the new home this goes up to 110%. This is all within the county you currently reside. So you can see the advantages here. If you were the lucky person who bought the home in Montclair 20 years ago for $40,000 and now are selling it for $690,000, you can now purchase another home for $690,000 or less and pay only that $530.80 in yearly taxes plus whatever special non-valorem taxes there are where you buy. That is a whole lot different than paying over $9,000 a year based on the today’s purchase prices.
Proposition 90
Two years later proposition 90 was instituted which allows persons 55 or older to transfer their tax base from one county to the other. Unfortunately this is a local option law so only certain counties have chosen to participate. If the county you are moving from does not have the proposition 90 ordinance, for example San Francisco County, it does not matter as far as your ability to transfer your tax base. What matters is what county you are transferring your tax base to has the ordinance in place. Currently Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura counties are the only California counties cooperating with the transfer tax from county to county. Therefore you cannot sell your home in Alameda County and transfer your tax base to Contra Costa County as they do not participate. One would think, at this point in time, that counties like Contra Costa and Sonoma that have been so badly hit by the downturn in the market might institute this tax law so that more baby boomers would have incentive to buy homes in these counties.
One more thing, one can also purchase land and build a new home within two years of selling their home as long as the total cost of the land and the home does not exceed the sales price of the original property plus whatever increase is allowed, i.e. the 105% or 110% depending on the time periods after the sales of the original home.
Proposition 110
There is one more proposition applying to transferring of tax base. In 1990 proposition 110 extended the benefit to people who were of any age but severely or permanently disabled. So if you or your spouse becomes disabled, you can transfer the tax base. This can be very important if your current home is not suitable any longer due to special needs of the disabled person or if affordability of the payments prohibits keeping your current home.
Senate Bill 1692
And there is more that happened in 1996 when senate bill 1692 allowed people who had had a previous claim in regard to transferring the tax based on age 55 who then got disabled. This bill allows you to do a second transfer of tax base based on the disability.
Written and Edited by Dan Joy
8 responses so far ↓
Mike Harmon // July 9, 2008 at 5:37 am
I found your site on technorati and read a few of your other posts. Keep up the good work. I just added your RSS feed to my Google News Reader. Looking forward to reading more from you down the road!
susan // July 23, 2008 at 3:44 am
I appreciate this information! I had heard about the tax transferability of Prop 13. This is going to save my life when I retire in a couple of years.Wow! Thanks alot! I surprised no one else has commented. This is such good, clear news. Thank God for easy to read and understand articles like yours! I will let you know in a few years how easy it is to do it. Slam
Bob // January 25, 2009 at 2:55 am
What is considered the ‘purchase’ date of the new property? If I close on my current property on March 10 and close on the new property on March 11, does the 105 % rule apply?
danjoy // January 25, 2009 at 5:16 pm
Hi Bob,
The purchase date is the day you close escrow on the new property and receive the keys. So if you close the day after your current home sells, the 105% rule should apply. It would be better if your new property were closing a bit later because in this market things can always come up with a sale that could delay things a few days. If the buyers of your current property are unable to close exactly on time, you could end up closing on your new property before selling the current one which would put you in a very different position.
Dan Joy
Fran // February 15, 2009 at 11:07 pm
I am confused on one point.
If you have transferred your tax base one time already, but you need to move again, can you take your tax base a second time as long as you’re moving to another county?
danjoy // February 16, 2009 at 8:44 pm
My understanding is you can only transfer your tax base 1 time. I don’t think county matters on that.
Kayla Canerdy // February 22, 2009 at 8:32 pm
My home’s grant deed is now in my name only since my husband’s passing. I have a permanently disabled son who lives with me and I am over 55, if I move can I add my disabled son onto the new home’s grant deed as a joint tenant and keep my lower taxes? I know the tax base can be grandfathered in after my death if the property is in trust to him. It would be great to just add him on the new home at the time of purchase. If not, can the tax base still go to him
through the trust even though I used my 1 time
transfer of the tax?
danjoy // February 23, 2009 at 2:13 am
I don’t see that being a problem. It is only important that one person be 55 years of age or older to transfer the tax base so adding him should not affect the tax base once you’ve made the transfer. You should check with the county tax assessors office of the county you are doing the transfer in just to make sure if you can add him at the time of purchase without changing that ability to transfer the base but I’m pretty sure you can. The tax base gets passed down to the people that inherit the property after death through probate or a trust as well.