Voters approved Proposition 60 and 90 in the late 1980's giving homeowners older than 55 a one-time property tax break when they sell their primary residence and buy a replacement property of equal or lesser value. The California Association of Realtors (CAR) sponsored legislation that would have extended this tax break to Seniors who buy a more expensive home. The thinking behind this Bill, which didn't make it out of the Appropriations Committee, is that many times Seniors have to spend more money to downsize to a newer home or one with a more age-friendly floor plan. This prevents many empty nesters from selling big homes they no longer need or want because they can't afford to take on a higher property tax bill. If they were able to move, it would increase the supply of homes for young families. It might also help the move-up buyer who needs a bigger home for a growing family and would get them to sell their homes and therefore increase the supply of homes for first time home buyers. In high cost counties like Marin, this could definitely incentivize Seniors who want to sell.
This is how it works; today with Prop. 60 and 90, seniors who sell their home before buying a replacement property can spend up to 5% more on a new home if they buy it within a year, or up to 10% more if they buy within 2 years. But, if they buy first and sell later, they can't spend even $1 more on the new home. The Bill proposed by CAR would amend Props. 60 and 90 so seniors could transfer their assessed value to a more expensive home, but the difference in market value between the old and new homes would be added to their value. So for example, if a Senior sold their primary residence for $1.1 million and purchased a replacement property for $1.2 million, they could carry over the tax base, but it would increase by $100,000.
Some argue that this Bill would cut property tax revenue but that only looks at one side of the equation. When a Senior sells his/her home, it gets reassessed at market value which increases property tax revenue. If a Senior buys a more expensive home, they will be paying additional property taxes which also increases tax revenue.
This Bill isn't dead. CAR plans to reintroduce it in the Assemby. For Marin Seniors who are in a position to take advantage of a once-in-a-lifetime opportunity to use Props. 60 or 90, it could unlock their equity and help them get into a home that is more manageable.
If you would like to know how you can make Prop. 60 or 90 work for you, give me a call.
Janis Peterson, Realtor - 415-271-3109 or Janis@MarinModern.com