Prop. 19 will expand tax savings for senior and disabled homeowners

Senior and disabled homeowners are eligible for a new tax break thanks to a ballot proposition California voters approved last November.

Prop. 19 will give some people more opportunities to transfer their lower Prop. 13 tax base from one home to another when they sell and buy another home.

The  measure updates two earlier ballot measures, Props. 60 and 90. They allowed people over 55, the severely disabled and people who lost their homes in a natural disaster to transfer their Prop. 13 property tax from the home they sell to one they buy.

These measures gave qualifying property owners a huge tax savings, especially when they have owned their primary residence for decades. Their property taxes may be as low as a few hundred to a few thousand dollars a year because Prop. 13 — passed during a 1970s tax revolt — kept their home’s assessed value way, way below market values.

But to get the Prop. 60/90 benefits, the eligible homeowners had to buy a home of equal or lesser value than the one they sold. The new home also had to be located in the same county as the old one or in one of just 10 other counties.

Effective April 1, senior and severely disabled homebuyers can keep their lower Prop. 13 tax when moving anywhere in the state — and even when buying a more expensive home.

Let’s say you’ve lived in your two-story, four-bedroom pool home in Mission Viejo for the last 30 years.

You’re over 55, the kids are grown and living on their own and you want to downsize to a smaller, single story home – maybe even a more expensive one.

Thanks to Prop. 13, the assessed value for tax purposes increased just 2% a year on your current home, while its market value rose much faster. Hence, your current taxes are significantly lower than they would be if they were were based on your home’s current market value.

You call your agent now and do all the things she suggests to get the house ready to sell for top dollar. (Hey, even though it’s a hot seller’s market, you want to put your best foot forward.)

Even though your beloved family home has a taxable value of just $655,000, you sell it for $1 million and buy a new one for $1.2 million.

To calculate your new property tax value, you must know your original home’s current assessed property value, found on your current property tax bill labeled “Total Net Taxable Value.” In this case, it’s $655,000.

Now, subtract the sales price of your original home from the purchase price of your replacement property. Add the difference to your original home’s current assessed value to get the assessed value of your new home.

Here’s the equation: $655,000 + ($1,200,000-$1,000,000) = $855,000.

So rather than have an assessed value of $1.2 million and pay a tax of $12,000 a year, your new assessed value under Prop. 19 will be $855,000 and your new tax will be $8,550 — a savings of $3,450 a year.

Which would you prefer to …read more

Source:: Los Angeles Daily News