For some people, the idea of buying a NEW HOME sounds appealing. They have their finances in order, qualify for a loan and have the Down Payment ready to go, but if they purchased their current home many years ago, they might end up paying a much higher property tax, and that might be stopping them from going forward with the purchase. For example, lets say a couple purchased a home in Rancho Santa Fe in 1995, they might have paid $800,000.00 and now they want to sell their Rancho Santa Fe property and buy a home in Del Mar. The new home has a price of $1,500,000.00 and their current home will be selling for $2,500,000 so even though they are downsizing the property tax that they will be paying on the new house is almost double of what they are currently paying.
There are two Propositions in the state of California that allow you to transfer your current tax base to your new property, those are prop 60 and prop 90.
Now there is a catch, actually more than a catch there are several restrictions in order to qualify for either one of this propositions.
1. One of the owners must be 55 years or older at the time of the sale of the original Property
2.Both Properties have to have been or will be your principal residence.
3.The Replacement property must be of “Equal or Lesser current market value” than the original property. You are not allowed to combine two separate properties as a total value even if both of you are selling two homes to purchase a new one together.
4.The replacement property must be built (If new construction) or purchased, within two years of the sale of the original property (This may be two years before or after)
5.The owner has to complete and file an application within 3 years of the purchase of the replacement property, or new construction completion date.
This benefit can only be used once in your lifetime, unless you become severely disabled in which case there is a different exemption that applies (Proposition 110).
So what is the difference between proposition 60 and Proposition 90? Proposition 60 allows the tax transfer benefit only within the same county(intracounty). Whereas Proposition 90, will alow transfers from one county to another county in California (intercounty) It is however at the discretion of the county to allow such transfers. Not all counties will accept applications for this proposition and you are required to fill out a form and follow a process, this transfer will not happen automatically.
For more detailed information you can go to the California Board of Equalization Web Site http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#2 or ask your trusted CPA or Real Estate Lawyer.
For any other questions or comments please feel free to contact us at www.SanDiegoExclusiveProperties.com
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