Transferring Your Property Tax Base
Frequently new homeowners will ask why they are paying twice as much (or far more) in property taxes than their neighbor. The answer is Proposition 13. Passed by the voters in June, 1978, Proposition 13 is an amendment to the California Constitution that limits the assessment and taxation of property in California. It restricts both the tax rate and the rate of increase allowed in assessing real property as follows:
- The property tax cannot exceed 1% of a property's taxable value, plus bonds approved by the voters, service fees, improvement bonds, and special assessments.
- A property's original base value is its 1975-76 market value. A new base year value is established by reappraisal, whenever there is a change in ownership or new construction. Except for change in ownership or new construction, the increase in the assessed value of a property is limited to no more than 2% per year.
- Business Personal property, boats, airplanes and certain restricted properties are subject to annual reappraisal and assessment.
- In the case of real property, the adjusted (factored) base year value is the upper limit of value for property tax purposes.
Historically, the market value of real property has increased at a significantly greater rate than the assessed value, which is limited to no more than 2% per year, unless there is a change in ownership or new construction.
The result has been a widening disparity between the market value and assessed value of property in Santa Clara County. Long time property owners benefit from lower assessments while new, and frequently younger property owners, are adversely impacted by assessments that can be as much as ten times greater than the owner(s) of a similar property held for many years.
Proposition 60 allows homeowners 55 years of age and older to transfer the base year value of their principal residence to a newly purchased residence in the same county, providing that certain requirements are met.
The requirements, in part, for this exclusion include the following:
- The replacement residence must be purchased or newly constructed within two years (before or after) of the sale of the original residence. The purchase or new construction of the replacement dwelling must include the purchase of that portion of land on which the replacement dwelling will be situated.
- The principle claimant or the claimant's spouse who resides with the claimant must be at least 55 years of age at the time the original residence was sold. The claimant must be an owner of record of both the original and replacement residences.
- The sale of the original residence must qualify for reassessment under the provisions of California Revenue and Taxation Code Section 110.1.
- The principle claimant must have been either:
1. Receiving, or eligible for, a Homeowner's Exemption, or
2. Receiving a Disabled Veteran's Exemption on the original and replacement residences.
- The replacement residence must be equal to or lesser in value than the original residence. "Equal to or lesser in value" has been defined as: 100 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased before the original property is sold; 105 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased within one year after the original property is sold; or 110 percent of the market value of the original property as of its date of sale if the replacement dwelling is purchased between one and two years after the original property is sold.
- Special rules apply to multi-unit dwellings and mobile homes.
- Relief pursuant to Section 69.5 (Proposition 60 and 90) of the Revenue and Taxation Code can be granted only once, except for certain circumstances regarding severely and permanently disabled persons as defined in Revenue and Taxation Code Section 74.3.
Claims must be filed within three years of the date the replacement residence is purchased or newly constructed. You must complete the claim form and provide evidence and/or declare under penalty of perjury that you are at least 55 years of age. Application forms may be obtained by contacting the Real Property Division of the Santa Clara County Assessor's Office.
Click here to be directed to the IRS website to further explain the rules regarding Prop 60: https://www.sccassessor.org/index.php/tax-savings/transferring-your-assessed-value/senior-citizen-over-age-55-within-county
Proposition 90 allows a homeowner to transfer the base year value of their principal residence in one county to a newly purchased residence in another county providing that certain requirements are met. Only a limited number of counties are participating in Proposition 90.
Proposition 90 Requirements (Santa Clara County):
- The requirements for Proposition 90 in Santa Clara County are the same as for Proposition 60 except for the following:
1. Effective date: November 9, 1988.
2. A processing fee of $200 is required.
- The effective dates and filing fees vary from county to county. Those property owners interested in transferring the base year value from their principal residence located in Santa Clara County to a newly purchased residence in another county should call that county to make sure that the other county is participating in Proposition 90.
- The following is a list of those counties which have approved Proposition 90 and will currently accept base year value transfers from other counties. (Since the counties listed are subject to change, we recommend contacting the county to which you wish to move to verify eligibility)
Click here to be directed to the IRS website to further explain the rules regarding Prop 60: http://www.sccassessor.org/index.php/tax-savings/transferring-your-assessed-value/senior-citizen-over-age-55-outside-county
If you believe you might be able to take advantage of any of these strategies but need more information please contact anyone on our team. We will be happy to direct you to the right resource to assist you in making your decisions.
We are not tax advisors. Be sure to check with your tax accountant to verify how you will be effected by any of the information described on this page.