Property Taxes and the 55 and Over Rule

Ordinarily, as we all know, when the ownership of California real property changes, the property is reassessed at its current fair market value and the new owner pays property taxes based on the reassessment. Proposition 60/AB 60 creates an exemption to this general rule by providing that a taxpayer who is 55 years of age or older may transfer the Proposition 13 base year assessment value of his/her principal residence to any replacement dwelling of equal or lesser value within the same county. Proposition 90/AB 2878 enables such taxpayers, in certain circumstances, to transfer their base year value to a replacement dwelling in another county. In other words, if eligible, the homeowner will pay property taxes on the replacement home based on the same assessment value as the former home.

In general, "equal or lesser value" of a replacement dwelling has been defined as: 100% of market value of original property as of its date of sale if a replacement dwelling is purchased before an original property is sold; 105% of market value if a replacement dwelling is purchased within one year after the sale of an original property; 110% of market value of original property as of its date of sale if a replacement dwelling is purchased within two years after the sale of an original property. The replacement residence must be purchased or newly constructed on or after November 5, 1986, if the original purchase is in the same county; or after May 18, 1989, if the original residence is not located in the same county. Also, the replacement residence must be purchased or newly constructed within two years before or after the sale of the original residence.

Not every county allows the inter-county transfer. Each county's board of supervisors must adopt an ordinance that would grant the exemptions to taxpayers who move into that county from another county. According to the Contra Costa County Assessor, Contra Costa and nine other counties have adopted such an ordinance. To determine whether a particular county has adopted such an ordinance, interested parties should contact the office of that county's assessor or tax collector, or the county board of supervisors. Also, these county agencies can provide information about the subtleties of these propositions. It's certainly worth investigation!!