Senior Tax Relief - PROP 60 and PROP 90

(*) Please consult your tax advisor for details. 

Proposition 13 (PROP 13) - California PROP 13 prohibits property tax increases until property ownership is changed.  This usually results in much higher property tax for the new home due to the general increase in market values of the housing market. 

For example, seniors who bought their house 30 years ago for $50,000 will see the house increase in value to, maybe, $700,000.   The home owners, having paying property tax based on the original purchase price of $50,000, usually can not afford the much higher property tax for the new property they plan to purchase - in Marin, the lowest priced condos are priced at $300,000 or up today.    

Proposition 60 (PROP 60)  - As a tax relief for seniors, if either spouse if over age 55 when the home is sold; PROP 60 allows replacement of a primary residence with a new home of equal or lesser value if the owners move within the same county.  The owners can then transfer assessed values of the old home under Prop 13  assessed to the new property.  This tax relief is only allowed once in your lifetime.  If married and one of the spouse has used this tax relief before, the other spouse will not be able to claim it.    

Using the above example, if the couple above, living in Marin, downsized to a house valued at $500,000 (equal or lower value); they will be able to pay the same property tax as their original home as long as their new house is located in Marin.    

Proposition 90 (PROP 90) - Prop 90 allows counties to elect to accept transfers of Prop 13 values for moves from other counties when a primary residence is replaced with a less expensive (but see below) home. If you are over 55 and move into a county which accepts Prop 90, you may take your old, lower Prop 13 value, regardless of from which county you move.

There are currently only 7 counties in California that accept Prop 90 (as of 06/01/2011).  The counties are Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura.

A few fine points of PROP 60 and PROP 90:

If you buy new home first, and then sell the old home, your new home value must be lower than the old home. 

Example, if you buy a new home and then sell your $500,000 home.  To benefit from Prop 60 or Prop 90, your new home must value lower than or equal to $500,000

If you sell the old home first, and then buy the new home within one year (365 days) of the sale of the old home, you can go up 5% in the purchase price of New Home.

Example, If you sell your $500,000 home, but purchase your new home within a year of sale, your new home can worth up to $525,000

If you buy New Home more than 1 year but less than 2 years of sale of your home, your new home can have a value of 10% more than the old home. 

Example, If you sell your $500,000 home, but purchase your new home between day 366 and under two years, your new home can have a value of up to $550,000

(*) Please always check with your tax advisor for tax advise.