How to know it’s time to downsize your home?

Are you considering downsizing as you head into retirement? If you are aged 55 and older, there is a tax break you can qualify for in California that allows you to keep your property tax base as you relocate.  California voters approved a pair of propositions in the late 1980s that would help empty nesters downsize without facing a huge property tax increase. Propositions 60 & 90 were designed to offset the effects of Proposition 13 which causes a reassessment at market value when the home is sold, and therefore results in additional taxes.

Requirements for Proposition 60

  • You or your spouse must be 55 years or older when the principal residence is sold.
  • Original and replacement property must be in the same county.
  • You can only transfer once in a lifetime.
  • The replacement property must be of equal or lessor value than the original property sold.
  • The principal and replacement property must be your primary residence.
  • Must be eligible for the homeowner’s exemption or disabled veteran’s exemption.

Requirements for Proposition 90

  • Same qualifications as Prop 60 except under Prop 90 you can transfer to a different county.
  • As of June 5, 2015 there are ten counties that accept intercounty transfers:

time downsize home tax

We recommend contacting the county you wish to move to and verify eligibility.

What’s the Logic?

These constitutional tax incentives allow senior citizens to transfer the base value of their current home to a replacement property resulting in substantial tax savings.  One other benefit is that you do not necessarily have to downsize.  Let’s just say for example, a couple living in a condo worth one million dollars in San Francisco, can purchase a single family home in Huntington Beach if their preference is to retire in a more traditional style home.  One other advantage is that you can make improvements to your new home receiving the same tax relief as long as your improvements do not exceed the market value of the original property.  Follow in the steps of the thousands of seniors that are taking advantage of this tax relief today.

Make sure to contact your ELLS Advisor today for more information.

Written by:  Michael Hauser, Tax Associate

About 

The ELLS CPAs staff is dedicated to their mission of providing the highest quality service and standards of professional conduct for all of their commercial and individual accounting clients. Call 714-569-1000 to schedule an appointment.