The most significant advantage that comes with owning a home in California is Proposition 13. It limits the rate at which your home taxes can rise annually. It also allows long-term property owners to pay taxes based on property assessed value. This value is always way below the prevailing market value, making it easy for senior homeowners to move into retirement.
If you are a long-term San Diego homeowner aged over 55 and looking, you can transfer your property tax base from your old property to your new home under proposition 60. However, this is a one-time opportunity under the caveat that the new property’s market value must be lower or equal to the home you are selling.
The regulation came in place to help people who wanted to downsize in their retirement without losing out on lower home assessment. The tax savings in this scenario can be of great significance. It could also be the determinant of whether you move to your next La Jolla property or you stay put.
The general rule of thumb is that your assessed tax base can only go up by the prevailing inflation rate but not surpassing the 2% per annum. However, as stipulated in proposition 13, your home will undergo reassessment if there is a change of ownership or new construction. The same proposal specifies that you can get a temporary tax reduction if your property’s value decreases.
What are the conditions of moving or downsizing without increasing the tax base?
The main conditions for moving or downsizing without increasing your tax base are:
- Proposition 60 gives property owners the chance to move or downsize without significantly increasing their tax bills. However, this only acceptable under the following restrictions;
- You must be at least 55 years of age to transfer you tax base
- Both your new and old home must be in the same county. However, under proposition 9, you can transfer the tax base to only eight counties that accept the transfer of base year tax values from other counties. They include Los Angeles, Alameda, Santa Clara, Orange, San Diego, Ventura, and San Mateo. We recommend that you check with your assessor before making this move as the laws are subject to change.
- Your tax value may rise if you include home items like furniture and appliances when selling the property. These items may raise the market value of your new home to above what the old property costs. When that happens, you will lose the tax base.
- You must purchase the new home within three years before or after you sell your original property.
- The market value of your new house at the time of purchase must not exceed the selling price of your old property. That is if you purchase a new property before selling the old one. However, when you sell the existing home before buying a new one, you can get a cushion for inflation. The reprieve is 105 percent of the original property in the first year or 110 if you buy a new home within the second year.
Get help with moving your property tax base in San Diego
Downsizing SD is here to help you with all the aspects of your relocation, including moving your property tax base. This can be a complicated process best left to experienced professionals who have done it successfully on numerous occasions. Contact us today and let us provide vital assistance. We are here for you.