Do You Qualify For Tax Savings?

Qualify For Tax Savings? With laws and legislations constantly changing and improving, it is so important to know and understand which propositions you can benefit from. Propositions 60 and 90 are tax initiatives which allows qualified homeowners over the age of 55 to sell their primary residence and transfer its base year value to a new (or newly reconstructed) replacement residence of equal or lesser value. 

 

This one time benefit would result in substantial tax savings, however, there are a few stipulations that apply to this benefit.

In order to be considered a ‘qualified homeowner’ the claimant must be 55 or older, and own and occupy the original property as the principal place of residence. If the claimant is married and resides there with his spouse, then both spouses qualify if either of them is at least age 55.

 

The difference between proposition 60 and proposition 90 is simple: proposition 60 relates to transfers within the same county (intra- county), whereas proposition 90 relates to transfers of base value from one county to another county in California (inter-county). The base year is the year that the property is purchased. The base year value, or the original base year value, is the full market value of the home in the year that the property was purchased.

 

So let’s break it down: If you are a homeowner over the age of 55 and you want to move to a new primary residence, you have the ability to transfer the value of your current home at its original purchase price, to a new home (as long as the new ‘replacement home’ is purchased within 2 years of the sale of your original home and is of equal or lesser value as the original home on the date it was sold). For example, let’s pretend you purchased a home for $200,000 in 1980. Fast forward to present day, the current market value of your home is $800,000. You can sell your home and purchase a new home for $800,000 or less and transfer the property tax from the original property at its purchase price of $200,000.

 

This once per lifetime tax break is especially helpful for homeowners who may be on a fixed income, and may not be able to afford the cost that would come with moving to a new home due to the increased annual property tax and will hopefully give these candidates the ability to move freely without the financial limitations of increasing property tax values.

 

Do you still have questions? Give us a call today or fill out the form on the right and we will reach out to you!