Friday, March 16, 2018

Thinking of Downsizing Your Home?

Pathways Advisory Group, Inc.
Jeff Karst, CFP®

Have you ever thought about downsizing your home but worry about new property taxes?

A little background

Proposition 13 was passed overwhelmingly by California voters in 1978.  It establishes the tax base when you purchase a property and that base value increases 2% per year.  

Assume you purchased your house in 1987 for $125,000. Your current tax base would be about $230,000 (assuming no re-assessments).  If the home next door sells for $699,000 the new buyer’s property taxes are roughly three times higher than what you pay each year.

It's time to downsize

The kids have long moved away and you’re ready to downsize to a smaller, more manageable home.  Assume your home sells for $699,000 (similar to your neighbor’s) and you purchase a smaller home for $450,000.  You have a smaller, more manageable home that should cost less.  The only problem is your tax base was $230,000, so your property taxes will double.

Or maybe not…

There is a once in a lifetime exemption to retain your property tax base if you downsize your home.  Proposition 60 allows you to transfer your base value when you downsize (the new home costs less than your previous home) within the same county.  

You or your spouse must be over age 55 to apply for the exclusion.  The California Board of Equalization has a page dedicated to Frequently Asked Questions about Proposition 60.

You may not be able to transfer all the trees and shrubs from the old home, but you may be able to transfer the nice, low tax base!

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Thursday, March 15, 2018

Tax Time is Here, and Your 1099s Should Be Too!

We have been informed that all Schwab 1099s have been mailed out as of February 28th. Schwab extended their mailing date into February to reduce the number of corrected 1099's, but corrections are still a possibility. The forms should be available online through your Schwab login. Please give our office a call if you have any questions.

Good luck with your taxes, and happy filing!

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