Introduction
In this article, we will discuss Proposition 60 and 90, two tax relief measures in California, with Larry Stone, the Santa Clara County Tax Assessor. These propositions, passed in 1986 and 1988 respectively, allow homeowners to transfer a low property assessment to a new home while retaining the old assessed value. We will explore the key points of these propositions, the requirements homeowners must meet, and the controversy surrounding them. So, let’s dive in and uncover everything you need to know about Prop 60 and 90!
Key Points
- Property Tax Relief Measures in California: Since the passing of Proposition 13 in 1978, which limits property tax increases, California has adopted several additional propositions to provide additional tax relief on top of Proposition 13.
- Propositions 60 & 90: Proposition 60 and 90 were passed in 1986 and 1988 respectively. These propositions allow homeowners to transfer a low property assessment to a new home and retain the old assessed value.
- Transfer Conditions: To qualify for these propositions, certain conditions must be met:
a. The homes involved in the transfer must be the homeowner’s principal residence.
b. The new home must be of equal or lesser value than the old home.
c. The homeowner must be 55 years of age or older.
d. The homeowner must file an application with the local county assessor within a two-year period.
e. The sale and purchase transaction must occur within the two-year period. - Prop 60: Transfer within the Same County: Proposition 60 allows homeowners to transfer their assessment to a new home within the same county.
- Prop 90: Transfer between Counties: Proposition 90 allows homeowners to transfer their assessment from one county to another, but the receiving county must have adopted an ordinance to accept such transfers.
- Accepting Counties for Prop 90: Currently, there are ten counties in California that accept Proposition 90 transfers: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, and Ventura.
- Original Intent versus Reality: These propositions were initially intended to assist homeowners in downsizing or moving closer to family. However, statistics show that the primary reasons homeowners utilize Prop 60 and Prop 90 are different.
- Controversy: One controversial aspect of Prop 90 is the transfer of a low assessed value to a county in which the homeowner has never paid property tax but can vote in the election.
- Market Value & Appraisal: Market value plays a crucial role in determining the success of Prop 60 and Prop 90 transactions. While sales and purchase prices are usually accepted, they must reflect the current market value. If there is a significant disparity, the appraiser determines the fair market value, which assessors must use for property assessment.
- Overpaying for a Property: If a property is overpaid for, it will be assessed at fair market value, even if the purchase price was lower. This ensures that properties are not undervalued for tax purposes.
- Real-Life Example: Larry Stone shares a case where a homeowner purchased a $100 million home but assessed it at $52 million because it did not reflect the fair market value.
- FAQ: Larry Stone addresses common questions received by assessors regarding Prop 60 and Prop 90:
a. Determining Replacement Property Value: Homeowners can determine if the replacement value is equal to or lesser than the original assessed value based on the timing of the purchase or completion of the replacement property.
b. Moving Out of State and Returning: Homeowners who have moved out of state and wish to return can still qualify for Prop 60 and Prop 90, as long as both sale and purchase transactions occur within a two-year period.
c. Renting Out a Property Before Moving: Homeowners can rent out a property before moving and still qualify for Prop 60 and Prop 90, as long as both transactions fall within the two-year period.
d. Buying a Vacant Lot: Homeowners who own a vacant lot and build a new home on it can qualify for Prop 60 and Prop 90, as long as the completion of the new construction occurs within the two-year period.
e. Spousal Requirements: Either the claimant or the claimant’s spouse, who resides with the claimant, must be at least 55 years old to qualify for Prop 60 and Prop 90.
f. Inherited Property: Inherited properties do not qualify for Prop 60 and Prop 90 unless both the original and replacement properties undergo a full cash value reappraisal during the transfer.
In conclusion, Proposition 60 and 90 provide valuable property tax relief for California homeowners looking to transfer their assessments to new homes. By meeting specific requirements and understanding the intricacies of these propositions, homeowners can take advantage of the tax benefits they offer. It is essential to consult with the local county assessor’s office to ensure compliance with the necessary procedures. With this knowledge in hand, homeowners can navigate the process confidently and enjoy the benefits of Prop 60 and Prop 90.