How do I preserve my property tax base with my next real estate transaction?

Passed in 1986, Proposition 60 is meant to help older California homeowners who want to downsize but fear the wallop of a higher property tax bill on their new residence. If you’re under 55, the law allows you to transfer your current property tax basis into your new home, provided that it’s in the same county and worth less than the one you’re selling.

There are a handful of rules that are important to follow when taking advantage of the Over 55 Rule:

1) Your new home must be purchased within two years of the one you sell. If you make the purchase before you sell, the market value of the new house on the day you buy it cannot exceed the value of the old home on the date it sells.

2) To account for inflation, the value of the replacement home can be as high as 105 percent or less of the home you sell if you buy within one year of selling.

3) If you sell in San Francisco, you can buy down and qualify for any purchase in San Francisco. Proposition 90, which passed in 2006, also allows you to sell and buy down into a handful of other counties that allow you to transfer your property tax basis. The State Board of Equalization lists 10 of them.

Unfortunately, San Francisco does not reciprocate with any of these counties. You cannot sell outside of San Francisco and transfer your property tax basis into the city. (I know – annoying, right?)

Two other important considerations:

1) This is a once-in-a-lifetime deal and affects spouses. You cannot do this again later if you become single or are married to someone else.

2) Proposition 60 has nothing to do with the capital gains exclusion. The capital gains tax exclusion exempts from taxes the first $500,000 of profit from the sale of your principal residence, or $250,000 if you are single. This rule applies regardless of your age so long as you have used the home as your principal residence for two of the past five years.

Specific questions? Get in touch.

Dreaming of San Francisco? Cece Blase offers local advice to San Francisco buyers, sellers and owners– and feeds the dreams of those who wish they could live in Tony Bennett’s ‘City by the Bay.’ Call 415-577-0809 or email cblase@paragon-re.com. www.ceceblase.com