Laguna Woods – Moving Your Tax Base

Moving Your Tax Base – Propositions 13, 60 and 90

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Proposition 13 – Your Tax Liability

On June 6, 1978, nearly two-thirds of California’s voters passed Proposition 13, reducing property taxes by approximately 57%. The Proposition 13 tax rate is .01% of the purchase price and annual tax increases are limited to no more than 2%. When property is sold it is reassessed at market value; the new purchase price.

Proposition 60/90 – Your Tax Relief

These Propositions are constitutional initiatives passed by California voters. They provide tax relief by allowing seniors, age 55 and older, to move their current tax base from the sale of their current qualifying residence to a new purchase or newly constructed replacement home. The cost of the replacement home must fall within the allowable purchase price of up to 105%, if purchased within the first year after the sale of the qualifying residence, or 110% if purchased within the second year of the sale of the qualifying residence. A lower priced purchase also qualifies.

PROPOSITION 60 allows seniors 55+ to transfer the lower tax base within the same County.

PROPOSITION 90 allows seniors 55+ to transfer the lower tax base from County to County between participating Counties.

How it Works – Example Scenario

The homeowner is currently selling a qualifying residence purchased twenty years ago for $200,000 that is subject to Proposition 13 tax rates. The current tax rate is .0125 %. Thus, the homeowner has an annual tax burden of $2,500 + up to 2% per year allowable increase in property taxes annually and any tax increases assessed for improvements to the home. The home is sold for $800,000.

Buying Higher than Sold Scenario

  • The homeowners sell the qualifying residence at $800,000 and purchase a new residence within the first year at a purchase price of $840,000 (1.05% of sold price). The homeowner can move the tax base from the home being sold to the new home purchase.
  • TAX BASE ON QUALIFYING HOME SOLD:
  • $200,000 @ .0125 = $2,500/annual property tax (+ 2% annual increase & tax assessed for improvements during holding period)
  • NEW PURCHASE HOME:
  • $840,000 @ .0125 = $ 10,500 annual property tax
  • TAX SAVINGS: $8,500 Annual Property Tax Savings

Buying Lower than Sold Scenario

  • The homeowners sells the qualifying residence and purchases a new residence within the first year at a purchase price of $400,000. The homeowner can move the tax base from the home being sold to the new home purchase.
  • TAX BASE ON QUALIFYING HOME SOLD:
  • $200,000 @ .0125 = $2,500/annual property tax (+ 2% annual increase & tax assessed for improvements during holding period)
  • NEW PURCHASE HOME:
  • $400,000 @ .0125 $ 5,500 annual property tax
  • TAX SAVINGS: $3,500 Annual Property Tax Saving
  • ** Examples shown use a tax rate of .0125 and do not take into consideration Mello Roos taxes or other supplemental taxes.

Proposition 90 – Participating Counties as of January 2001

  • Alameda
  • Los Angeles
  • Ventura
  • Orange
  • Santa Clara
  • Kern
  • Modoc
  • San Diego
  • San Mateo

The resident must file a claim form through the tax assessor’s office to determine if the transaction qualifies under these propositions

Click Here for a Copy of Code from County Assessors Office

NOTE: This document is designed to be used strictly as an example of how propositions MIGHT work for a potential seller or buyer. It is NOT intended or presented as advice to rely upon under any circumstance. Any buyer or seller wishing to consider employing the use of Proposition 60 or 90 MUST get advice from their individual attorney and/or accountant to determine if these propositions apply for a their given situation. The information contained here is NOT to be relied on for any reason by any person who should come in contact with this document.