24 Jun Reappraisal Exclusion Program–Tax Savings For Sellers 55 And Over
To help homeowners over the age of 55 be able to afford to move to a different home in California or purchase a “move down” home and not suffer an increase in property taxes, Propositions 60 and 90 were passed. The Propositions, also known as the Reappraisal Exclusion Program, provide a one-time property tax relief by preventing a property valuation increase when someone over the age of 55 sells their home and purchases another home of equal or lesser value, effectively saving the seller thousands of dollars each year.
Both Sellers and REALTORS need to understand that there are specific timelines to apply for the exclusion, they need to know which counties in California allow the transfer, and what are the qualifications for the exclusion. Let’s start by defining Proposition 60, 90 and 110.
What are Propositions 60 and 90?
Propositions 60 and 90 are constitutional amendments passed by California voters that provides property tax relief for persons aged 55 and over. it allows these persons, under certain conditions, to transfer a property’s factored base year value from an existing residence to a replacement residence. Typically the property tax of a newly purchased or constructed residence is based on its current market value upon change of ownership. However, the provisions of Propositions 60 and 90 may result in substantial tax savings since it allows the property tax of the original (sold) property to be transferred to the newly purchased or constructed home if eligibility requirements are met.
Proposition 110 allows the transfer of a base year value for severely and permanently disabled persons. Except for the disability factor, the qualifications for Propositions 60/90 are same as Proposition 110.
What is the difference between Proposition 60 and Proposition 90?
Proposition 60 allows transfers of base year values within the same county (intracounty). Proposition 90 allows transfers from one county to another county in California (intercounty) and it is the discretion of each county to authorize such transfers. As of January 2007, only seven counties have passed an ordinance authorizing intercounty transfers; however, it is recommended that you call your assessor for verification as it could change at any time.
Here are the counties currently allowing the Exclusion Program:
Alameda, Orange, San Mateo, Los Angeles, San Diego, Santa Clara and Ventura.
Here is a list of counties that have rejected Prop 90:
Butte, Calaveras, El Dorado, Fresno, Lake Madera, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Placer, Sacramento, San Benito, San Bernardino, San Luis Obispo, Santa Barbara, Santa Cruz, Shasta, Siskiyou, Solano, Sonoma, Stanislaus, Tulare, Trinity and Yolo.
What does “equal or lesser value” mean?
Sellers are able to take advantage of the Reappraisal Exclusion Program when they sell a home and purchase another home of equal or lesser value. What does that entail?
Equal or lesser value means that the fair market value of the replacement property does not exceed one of the following:
100% of the market value of the original property as of the date of the sale if the replacement property is purchased before an original property is sold.
105% of the market value of the original property as of its date of sale if the replacement property is purchased within 1 year after the sale of the original property.
110% of the market value of the original property as of its date of sale, if the replacement property is purchased within the 2nd year after the sale of the original property.
If you purchase a property of greater value than the original sale property, there will be no exclusion.
Timeline:
You must buy the replacement property within two years of selling the original property in order to qualify. You have three years following the purchase date or new construction completion date of the replacement property to file an application for the exclusion. As of the date the original property sold, the seller or the spouse of the seller must be 55 years or older or be permanently disabled.
Proposition 110 creates an exception to the one-time-only limitation for anyone who becomes permanently disabled after having received a reappraisal exclusion as a claimant over the age of 55 years. If a person over the age of 55 years transferred the base year value from an original property to a replacement property and subsequently becomes disabled, then that person may now transfer his or her base value a second time.
A seller may apply for this exclusion in the county of the replacement property by completing and submitting the necessary application form. Contact the County Assessor or download the application directly from the County Assessor’s website.
For more information about the Propositions, frequently asked questions and more, go here.
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