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| 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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