Prop 60 & 90

I have recently had two clients ask about prop 60 & 90. In both cases the clients are currently living in the Los Angeles County area and thinking of moving down to Laguna Beach. They both have a low tax base on their current homes, and they were (not surprisingly) wondering if they would be able to transfer their tax base to a new home. 

In most cases, Prop 60 and 90 allow senior citizens to transfer the value base from their current home to a replacement home. If the requirements are met this may result in substantial tax savings. So let’s take a closer look at propositions 60 & 90! This will probably be a bit of a dense read, but bear with me and you’ll discover if you can benefit from Prop 60 and 90.

The Basics

Who Qualifies?
If you or your spouse (who resides with you) is age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the base value.
This is a one-time only benefit. You must buy the replacement home within two years of the sale of the original property, and it must be your primary place of residence. A new claim must be filed within three years of purchasing or completing construction on the replacement property. If a claim is filed after the three-year period, relief will be granted beginning the calendar year in which the claim was filed.
Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again.

Eligibility Requirements
1. The replacement property must be your principal residence.
2. The replacement home must be of “equal or lesser current market value” than the original property. The “equal or lesser” test is applied to the entire 3. replacement residence, even if the owner of the original property acquires only a partial interest.
4. The replacement property must be purchased or built within two years (before or after) the sale of the original property.
5. Both your original and replacement property must be eligible for  the Homeowners’ Exemption or Disabled Veterans’ Exemption.
6. You, or your spouse, must have been at least 55 years of age when the original property was sold.

Frequently Asked Questions

What is the difference between Proposition 60 and Proposition 90?
Prop 60 relates to transfers within the same county (intra-county). Prop 90 relates to transfers of base value from one county to another county in California (inter-county).

If I qualify for Prop 60/90 benefits, do I still need to file for a Homeowners’ Exemption on the replacement property?
Yes. Homeowners’ Exemptions are not granted automatically.

What is the Prop 60/90 filing deadline?
A claim must be filed within three years of purchasing or completing new construction of the replacement property. If a claim is filed after the three-year period, relief will be granted beginning with the calendar year in which the claim was filed.

I plan to relocate from Los Angeles County to another county. Do I qualify for relief?
You may qualify for relief. Effective February 15th, 2010 the following counties in California have an ordinance enabling Proposition 90: Alameda, Orange, San Mateo, Ventura, Los Angeles, San Diego, Santa Clara, El Dorado.

Since the counties indicated above are subject to change, we recommend contacting the county to which you wish to move to verify Proposition 90 eligibility.

Do all types of replacement homes qualify?
If you meet all other eligibility requirements, relief is granted for a single family home, condominium, unit in planned development, cooperative housing, community apartment, mobile home subject to local real property tax, and living unit within a larger structure consisting of both residential and non-residential accommodations.

If I make an improvement to my replacement home within two years of purchase, can I get an additional tax relief for the new construction?
Yes, as long as the total amount of your purchase and the new construction does not exceed the market value of the original property at the time of the sale.

What does “less or equal value” of a replacement property mean?
The meaning of “equal or lesser value” depends on when you purchase the replacement property. In general, this means:

1. 100% or less of the market value of the original property if a replacement property was purchased before the sale of the original property, or
2. 105% or less of the market value of the original property if a replacement property was purchased or newly constructed within the first year of the sale of the original property, or
3. 110% or less of market value of the original property if a replacement property was purchased within the second year after the sale of the original property.

When making the “equal or lesser value” test, it is important to understand that the market value of a property is not necessarily the same as the sale or purchase price. The Assessor will determine the market value of each property. In new developments, the indicated sale price does not include upgrades paid for outside of escrow. The Assessor must consider the value of these upgrades when determining the market value.
If the market value of the replacement dwelling exceeds the “equal or lesser” value test, no relief is available.

Can I give my original home to my son or daughter and still get Prop 60/90 benefits when I purchase a replacement home?
No. An original property must be sold and subject to reappraisal at full market value.

If an original property has multiple owners, can Prop 60/90 tax relief be split?
No. The owners must determine between themselves which one will benefit. Only one original owner can claim Proposition 60/90 tax relief.

How do I file for Proposition 60/90?
Claim forms are available from several sources. Choose the ones most convenient for you.
For example: Online at www.assessor.lacounty.gov or www.ocgov.com/gov/assessor/forms/
The form needed is the Claim of Person(s) at Least 55 Years of Age for Transfer of Base Year Value to Replacement Dwelling (BOE-60-AH/OWN-89)

This information is provided solely as a courtesy by Jaleesa Peluso, Laguna Beach Realtor. It is deemed reliable, but not guaranteed. We recommend you consult with your attorney or tax adviser to find out if use of Proposition 60 and 90 is beneficial in your specific situation.

About Jaleesa Peluso
Jaleesa Peluso is a Laguna Beach Real Estate Agent. She specializes in coastal homes and luxury home marketing. For more information visit: www.jaleesapeluso.com. Contact: (949) 395-0960 or Jaleesa@JaleesaPeluso.com