Like proposition 13, California propositions 60 and 90 both have to do with property taxes and in a manner of speaking, work together. Proposition 60 transfers a homeowner’s base year property tax value from one home to another within the same county while proposition 90 transfers the tax basis from one county to another.
Under proposition 13, a home is appraised at full market value at the time of purchase. Prop 13 restrictions enable the home’s value to increase by only 2% per year rather than being reassessed annually to reflect the actual market value. This offers homeowners to avoid dramatic fluctuations in their property tax bills.
Propositions 60/90 allow the taxable value of a homeowner’s original primary residence to transfer to a replacement home, eliminating an increase in property taxes based on the new home’s appraised market value.
Unlike proposition 13, which automatically takes effect when you purchase a home, both propositions 60 and 90 must be applied for by the homeowners and there are specific stipulations that must be met in order to take advantage of these programs.
Prop 60/90 Requirements
- At least one of the homeowners must be 55 years or older when they sell their current residence
- You must purchase a home of equal or lesser value than the home in which the currently reside
- Both of the homes must be the owner’s principle residence and eligible for homeowner’s exemption
- This tax basis transfer can be used only once
- The claim for transfer must be filed within two years of the sale of the original property
- The claim can only be used by one member of a married couple. Domestic partners can each take advantage of prop 60/90 but not for the same residence.
- There is no partial credit or partial exclusions provided
During the escrow process, you must pay the existing, current tax bill on the replacement property. Any corrections will appear on the supplemental assessment. Also, if your property is in a trust, in order to take advantage of either proposition 60 or 90, you must be the beneficial owner of the trust and not just the trustee. If you inherited a home that is used as your primary residence, you can sell it when you are over 55, buy another of equal or lesser value and apply for proposition 60 or 90 tax savings.
How Proposition 60/90 Works
You sell your current residence for $1,000,000 and purchase a new home for $850,000. The assessed value of your former property (based on proposition 13’s 2% annual increase guidelines) was $539,713. If you meet all of the requirements and apply to take advantage of your one-time use of prop 60 or 90, your current tax basis will be applied to your new home plus 2%, making the assessed worth of the newly purchased property $550,507.
Applying for Proposition 60/90
Unlike proposition 13, which automatically goes into effect once a house is purchased, you must apply to take advantage of your one-time usage of either prop 60 or 90. Once both transactions are completed, the homeowner must file form BOE-60-AH with the county assessors office in which the new, replacement home is located.
If you are purchasing a home that is still under construction, there are very specific requirements that must be adhered to in order to take advantage of propositions 60/90. The best thing to do is to contact the County Assessor’s Office to understand in detail these precise guidelines in advance.
Not all counties within California recognize these propositions so it is always wise to consult your realtor or tax advisor prior to making any decisions. Click for more details on proposition 60/90 or visit the California State Board of Equalization website.