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February 9, 2011

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California Real Estate Propositions 60 & 90 – Reappraisal Exclusion for Seniors

by Bob Schwartz

San Diego property taxWith the first wave of Baby-Boomers reaching retirement age this year, I thought it appropriate to revisit a California law that can save seniors a lot on property tax:

Reappraisal Exclusion for Seniors – Propositions 60 & 90

Disabled property owners or persons over age 55 can sell their home and buy a replacement residence of equal or lesser value and transfer the tax value of the home sold to the new home one time only. The effect of this is to avoid a reappraisal of the value of the new home up to the purchase price. Time limits do apply.

In most cases, these constitutional tax initiatives allow senior citizens to transfer the trended base value from their current home to a replacement property if certain requirements are met. This may result in substantial tax savings.

Who Qualifies?
If you or your spouse who resides with you is age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the trended base value to your new property.

This is a one-time only benefit. You must buy or complete construction of your replacement home within two years of the sale of the original property. Both the original home and the new home must be your principal place of residence. A claim must be filed within three years of purchasing or completing new construction of the replacement property. If a claim is filed after the three-year period, relief will be granted beginning with the calendar year in which the claim was filed.

Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again.
Eligibility Requirements:
  1. The replacement property must be your principal residence and must be eligible for the Homeowners’ Exemption or Disabled Veterans’ Exemption.
  2. 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.
  3. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
  4. Your original property must have been eligible for the Homeowners’ or Disabled Veterans’ Exemption.
  5. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.

Naturally, do not rely on this information in making a real estate move. Things are always changing, so check with your legal & tax advisers as to the exact details of the law and how it may affect you personally.

San Diego attorneys
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