How You Can Transfer Your Lower Property Tax Basis To Your New Home -Rina Podolsky -Carmel Valley Real Estate Homes For Sale

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

Tax Credit’s all but gone…

Last year Both the Obama administration and the State of California rolled out tax incentives for first time home buyers and for New Homes sales.

 
The First Time Home Buyer incentive of up to $8,000 dollars is still available for those New Home buyers (New meaning you have not owned a property within the past three years) however they have to close escrow on the purchase of their home before December 1st, no word yet on whether this program will be extended, up to this point there are no signs showing that it will be. What this translates to for people looking to take advantage of this Tax Credit is that, you must be under contract by early September if you intend on using financing, it also means that people looking to buy a Short Sale property or just starting to look are running against the clock in a big way.

 
Regarding the $10,000 dollar tax credit for new homes, unfortunately that one has gone away. They had allocated $100 million dollars for that program and by July 2nd applications to qualify for this Credit were no longer available according to the State of California Franchise Tax Board Web Site http://www.ftb.ca.gov/aboutFTB/press/2009/Release_36.shtml They were slammed with request and the money has all been allocated.
Many buyers are still unaware of both tax credit’s expiring and they are doing their numbers taking this into account. Please talk to your CPA for more details on both and whether you qualify for the $8,000 credit.

 
The question at this point remains, how is the market (particularly home buyers) going to respond to this, many experts believe that this money back from the government played a big part in the market reactivation specially in the $600,000 and bellow price range that has become a sellers market in many parts of the State of California. This together with the “upcoming wave” of foreclosures that is expected to hit the market during the fall according to some analyst.
Next question would be, is there something that can be done pro-actively to mitigate both things happening at once? if so, is it being done?
I always appreciate your comments and questions, please keep sending them my way.
If you want more information on this or any other Real Estate related subject please visit my web-site at www.my858realtor.com. You can also follow me on Twitter http:/twitter.com/rinapodolsky or on Facebook  http://facebook.com/