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14
Feb

Tax Portability

This is information from the California Association of Realtors.

• Nearly three-quarters of homeowners 55 years of age or older have not moved since 2000, furthering constricting inventory. A large part of the reason why is that, even if they want to downsize or move closer to family, the prospect of a property tax increase of 100, 200 or even 300 percent, effectively locks our parents and grandparents in their homes.

• To help free up some of this inventory, and protect seniors, the disabled and victims of natural disasters, C.A.R. is qualifying a ballot measure, The Property Tax Fairness Initiative, that will help these homeowners to sell their current homes and move without being subjected to a what is effectively a massive “moving penalty.” These homes will then be available for families and other would-be buyers to purchase, increasing their assessed valuations, revitalizing communities and making California better. How It Works

• Under current law, homeowners 55 years of age or older can transfer their Prop. 13 property tax base – only once – to a replacement home located in the same county, and only if the purchase price for the replacement home is equal or less than the sale price of the original residence. In limited instances, these homeowners can also transfer their Prop. 13 property tax base to a home located in a different county that allows the transfer. Most counties do not make this allowance, and because of these arbitrary and geographic restrictions, the “moving penalty” is insurmountable.

• C.A.R.’s Property Tax Fairness Initiative would allow homeowners 55 years of age or older to transfer their Prop. 13 tax base to a home of any price, located anywhere in the state, any number of times. These protections are also extended to people who are disabled and those who have lost their homes to a natural disaster. It’s a carefully written initiative that includes appropriate safeguards while eliminating California’s property tax “moving penalty.” Why It’s Needed Now

• Under Prop. 13, homeowners are protected from rapidly increasing property taxes. However, seniors, who are often on a fixed income, fear they will not be able to afford a big property tax increase if they sell their existing home and buy another one, discouraging them from ever moving.

• This initiative will allow them to sell their home while keeping some property tax protections, continue paying their fair share in property taxes and therefore create homeownership opportunities for young families. How Property Tax Assessments Currently Work

• The amount any homeowner pays in property taxes is based on the assessed value of their home at the time of purchase. Generally, Prop. 13 limits property taxes to 1 percent of the assessed value at the time of purchase even if the value of the property subsequently increases.

• Unfortunately, homeowners lose their Prop. 13 property tax savings when they move to another home. There are two other Propositions that affect property tax basis: Prop. 60 and Prop. 90. C.A.R. believes these laws were a good first step, but their arbitrary nature and complicated restrictions need to be reformed. Prop. 60

• Under Prop. 60, senior homeowners – 55 years of age or older – may transfer their property tax base to another home in the same county so long as the purchase price of the replacement home is equal to, or less than, the sale price of the original residence. If a senior is moving from the Central Valley to Los Angeles or San Francisco, there’s no way they can do so and keep their protections.

• Additionally, a senior homeowner is limited to making only one such transfer over the course of his or her lifetime. And, if the spouse of a senior homeowner has already transferred a property tax base, that senior homeowner is disqualified from making another transfer of the tax base. Prop. 90

• Prop. 90 is an extension of the original Prop. 60 program. Prop. 90 allows senior homeowners to transfer their property tax base to a home in a different county so long as that county accepts such transfers. There’s no need for the local political process to influence the property taxes of seniors, the disabled and victims of natural disasters.

• Both Prop. 60 and Prop. 90 are relatively limited, which is where C.A.R.’s property tax portability initiative comes in. Buy Up Example Original Purchase Price: $100k Estimated Property Taxes: $1k/annually Existing Home Sale Price: $300k New Home Price: $400k New Property Taxes: $2k/annually The $100k difference between the $300k sales price and the $400k purchase price is added to the original Prop. 13 property tax base of $100k for a new Prop. 13 tax base of $200k.

The buyer still pays their fair share of taxes but isn’t blocked from making the move. Buy Down Example Original Purchase Price: $100k Estimated Property Taxes: $1k/annually Existing Home Sale Price: $300k New Home Price: $200k New Property Taxes: 1/3 of $200k = $67k or $670/year for property taxes If a homeowner buys a less expensive home, the property taxes will be proportionally the same as for the original home.

In other words, if the tax base was one-third of the sale price, the new property tax would be one-third of the new sale price. Buying down reduces the homeowner’s annual property tax bill. It’s the right thing to do, and when the home they sold is reassessed, it will generate more property tax revenue.

• What’s Next C.A.R. professional campaign team, working with REALTOR® volunteers across California, is working to gather nearly one million signatures to qualify it for the November 6, 2018 General Election Ballot. The team is also building a comprehensive voter education program to inform and share with voters why this initiative is so important for California’s future. The Property Tax Fairness Initiative is the latest example of REALTOR® leadership, fighting for homeownership and protecting seniors, the disabled and victims of natural disasters.

• If you haven’t already done so, please sign a petition today.

• If you have any questions, please email portability@car.org.

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Dawn Peterson

Cal Bre#02032202 Mobile: 818-943-1177

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Northridge, CA 91324

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