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Health & Fitness

Home Seller's reasons on choosing not to move – Part 3

Hopefully, you’ve read the first two parts of our blog from previous weeks. If not, feel free to look at those topics. So now we’re back to taxes. People are concerned that they pay such low property taxes and if they move they will have to pay higher taxes. Not necessarily true. There are two propositions on the books that allow people to transfer their current tax basis to their new property. They are known as Proposition 60 and Proposition 90.

So when you bought your home way back in the day for let’s say $100,000, you were assessed a property tax basis based on the purchase price. Since then, per year the county can only increase the tax by a maximum of 2%. This goes back to the late 1970′s when Prop 13 was passed. So now your home is worth let’s say $1,000,000, but your assessed tax basis is based on a much lesser value of let’s say $400,000. As you can see based on a 1% tax rate, you’re paying $4,000 per year instead of $10,000. They are just rough number to make things simpler. The rule is you need to purchase a home of equal or lesser value within 2 years of sale (It allows for a 105% of transfer value the first year and 110% of value the second). Now you wish to sell and downsize to a home that cost $700,000. Instead of paying a $7,000 per year property tax bill you can transfer your current tax basis of $4,000. Simple enough, right? You’ll need to be sure the county you’re moving to accept the transfer. Currently there are eight counties based on Prop 90 that allow this:

  1. Alameda
  2. San Mateo
  3. Santa Clara
  4. El Dorado
  5. Los Angeles
  6. San Diego
  7. Orange
  8. Ventura

For more information on these propositions, go tohttp://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm

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So again as you can see, there are ways to minimize taxation that you may not have known about. Stay tuned for more reasons that might be keeping you from moving, but shouldn’t.

Just remember the question really is where would you rather be…here or there.

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