Real Estate Watch – Halcyon Real Estate Services
You CAN Afford to Downsize!
Most Californians are familiar with the 1978 California tax law reform known as Proposition 13. This law changed the way the state assesses property taxes, and made it possible for older homeowners to remain in their homes on fixed incomes, even as the home’s market value skyrocketed. But it causes problems when they decide it’s time to downsize.
One of the most common frustrations I hear from clients is that as their children grow up and leave the nest, they find they no longer need all the bedrooms, bathrooms, and square feet they once did. They say they would love to be able to downsize to a more manageable home size; however, since property values have increased so much since they purchased their home, they can’t afford a smaller home, since the property taxes could be thousands more each year.
The good news I tell them about is a lesser-known tax reform, voted into law in 1988, known as Proposition 60. This proposition allows for homeowners over the age of 55 to transfer their Prop-13 base-year value to their new home, so long as it is of equal or lesser value than the one being replaced. Before this proposition, you might have had to pay higher property taxes, even if your new home was worth much less than your current home.
There are some limitations to keep in mind. Most importantly, this transfer can only be used once in a lifetime, and that includes your spouse. So if you and your spouse own a home together, the one transfer counts for both of you. Second, the transfer can only be used on primary residences and the replacement home must be purchased within two years of selling the first. Finally, if you are looking to move to a different county, only certain counties will accept the transfer, so be sure to check to ensure yours is on the list.
If you have been thinking about downsizing but thought you couldn’t afford the new property taxes, talk to your Realtor. You may be surprised by how much money you can actually save.
CalBRE #: 01924853
Halcyon Real Estate Services