Over the last month three clients have asked me questions about something they heard that would allow them to sell their home and transfer their currently low property tax rate to a new property. If you have lived in your home many years and bought when the market was much lower this could pertain to you.
What do I mean by this? Your property tax base rate was determined at the time you purchased your home. Under Proposition 13, property in California is usually only reassessed at current market value when it changes ownership (although there are exceptions to that.) At the time of the transfer, the tax is set at one percent of the newly-assessed value plus local taxes. In between changes of ownership, the assessed value can go up by an inflation rate of up to two percent per year or if a major remodel/addition is done that portion could add to the assessed value. Consequently, people who have owned their home for many years pay far less in property taxes than they would if they purchased the same house (or possibly a smaller one!) today since their base rate goes back to the value at the time they purchased the home.
In the late 1980s, California voters approved two propositions that give homeowners over 55, or those permanently disabled, a property tax break when they sell their primary residence and buy a replacement property that costs the same or less. The "same or less" has some caveats so confirm the details through the State Board of Equalization website which you can find here.
This was intended to provide some relief to those facing retirement from having to pay higher property taxes in a downsized property.
The transfer of base year values can be within the same county or between two California counties if that county accepts incoming transfers. Only 11 currently do but include San Diego, Orange and Los Angeles Counties.
If you are married only one spouse must be older than 55 to qualify. Once you have used this transfer, based on age, neither you nor your spouse can use it again unless one of you becomes disabled then you can transfer again based on disability.
This is just a brief overview of how the law works but it could work for you. The State Board of Equalization page that I linked to above has more answers or talk to your accountant for advice specific to your situation. If you are considering enjoying the benefits of this transfer and need help buying or selling it would be my pleasure to assist you. Contact me at Tracey@TraceyStotz.com. or (619) 200-0918.
