Prop 60 & Prop 90

If you're over 55 (or getting close) and you own real estate in California, Proposition 60 and Proposition 90 are possibly the two most important pieces of legislation you may have never heard of.

In 1978, with the passage of Proposition 13, California placed limitations on property taxes. Ever since, property taxes have been based on purchase price with increases capped at 2% per year, regardless of how much a property's value actually increases. As a result, many longtime Bay Area residents own homes that are now worth $1,000,000 or more, but are taxed at a substantially lower assessed value.

This reduced tax burden, for so many years a boon to homeowners, can act as "golden handcuffs" as homeowners reach retirement age. Why? Because when longtime homeowners downsize they find that their property taxes do exactly the opposite. Here's a common scenario:

Paul & Judy buy a house in Mill Valley in 1980 for $200,000.
In 2007, their house is worth $1,200,000 but they are still paying only $3000 a year in property taxes.
Paul & Judy's kids are grown, they've retired, and they want to sell their house and buy a waterfront condo for $900,000.
By downsizing, they hope to minimize housing costs as part of their retirement plan.
Unfortunately, the property taxes on their new condo will be $11,250 a year.
Paul & Judy say goodbye to their retirement plan.

It is to address just such a scenario that Proposition 60 was passed in 1986. Prop 60 allows Paul & Judy to transfer their property tax basis to their new condo. Of course, there are restrictions. They must move within the same county. They must be over 55. They must buy down in price (with some exceptions). They can only do it once. And more...

What if Paul & Judy want to leave Marin County? Enter Prop 90. This is a county-by-county "opt in" law that allows the same people who meet Prop 60 criteria to transfer their tax basis across county lines. Currently the following counties participate in Prop 90: Ventura, Los Angeles, San Diego, Santa Clara, Alameda, Orange, and San Mateo.

If you or anyone you know is 55 or older and considering selling their home, please look at this very helpful Q&A. (We've also added a permanent link to the link list on the right side of the page.) Then give Next Generation Real Estate a call. We're always here to answer your questions.