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Are you Eligible to Avoid Property Tax Increases Through Propositions 60/90?

Typically, whenever a home is sold in California, the new owner faces reappraisal of the home’s value and a parallel alteration to the home’s base tax value. It is typical that this often translates to an increase in the amount of property taxes that will be paid by the new homeowner, based on consistently escalating home values. This proves problematic for the elderly or retired community with decreasing or fixed incomes who sell their established home looking to downsize.

Here is an example, a couple bought a house in 1990 for $250,000, with a 1.25% tax rate, causing their annual property taxes to be $3,125.  The county assessor has the option to raise their property’s assessed value up to 2% a year throughout ownership. If the assessor followed the 2% permissible value assessment each year until 2017, the property’s current assessed value would become $410,151. This brings the annual property tax total to $5,126 - a significant difference from the original $3,125. 

The couple has decided to retire, and since they have an empty nest, they are now interested in downsizing to liquidate the equity they’ve accrued in their home over the last 27 years. They then sell their 3 bedroom, 2 bath home for $1,528,600 and buy a 2 bedroom, 1 bathroom home in the same neighborhood for $1,050,046. In terms of extracting equity from their previous home, they’ve made a great decision. However, the catch 22 is they will now be paying property taxes based on the value of their new home as opposed to their old. At a rate of 1.25% their new annual property tax total would be $13,125 - over two and a half times greater than what they were previously paying. Over a ten-year span, this would impose a tax payment of approximately $130,000. With a fixed income, this could be extremely difficult to manage, especially if there are any outstanding debts such as a renovation loan. This is the very reason why the state of California passed Proposition 60.

Prop 60 designates that homeowners over the age of 55 may sell their home and transfer its current assessed value to their new home provided that both homes are in the same county. Later on, Proposition 90 was passed allowing inter-county transfers, as long as the counties agree upon it. The following are the only counties in California which enable the inter-county transfer: Los Angeles, San Bernardino, Riverside, Ventura, Orange, San Diego, Tuolumne, Alameda, El Dorado, San Mateo, and Santa Clara.

It is important to note that there is one stipulation to this tax benefit. A homeowner may transfer their base year value only once. This includes both the homeowner and their spouse living in the same residence – neither will be permitted to file again. However, there is one exception to this rule. If the person who received tax relief based on age became severely and/or permanently disabled after the original claim was filed, resulting in their need to relocate (Prop 110), then they are permitted to transfer the base year value a second time. This, however is not applicable in the reverse situation; if one receives the tax benefit due to disability, they cannot later claim the same relief for age.

Eligibility Requirements for Propositions 60/90:

1. You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.

2. The replacement property must be your principal residence and must be eligible for the homeowners' exemption or disabled veterans' exemption.

3. The replacement property must be of equal or lesser "current market value" than the original property. The "equal or lesser" test is applied to the entire replacement property, even if the owner of the original property purchases only a partial interest in the replacement property. Owners of two qualifying original properties may not combine the values of those properties in order to qualify for a Proposition 60 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.

4. The replacement property must be purchased or built within two years (before or after) of the sale of the original property.

5. To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase date or new construction completion date of the replacement property.

6. Your original property must have been eligible for the homeowners' or disabled veterans' exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.

Please always be sure to check with your certified tax advisor. 

You can find more information regarding Prop 60/90 at:

Mark Your Calendars 

December 1st - PFAR's 26th Annual Wreath Auction - Altadena Town & Country Club @ 6:00pm  

December 1st - Mayor's Annual Holiday Tree Lighting Ceremony - City Hall, Centennial Square @5:00pm 

December 1st - Christmas Around the Drive Tree Lighting Ceremony - Fire Station on Old Engine #1 San Marino @ 5:00pm 

December 1st - La Canada Festival in Lights - La Canada Memorial Park @ 6:00pm 

December 1st - Descanso Gardens La Canada @ 5:30pm (goes until January 7th)

December 2nd - Tour Behind the Velvet Ropes - The Gamble House @ 9:00am 

December 2nd - Pasadena Assistance League Holiday Craft Fair - 820 E. California Blvd. @11am

December 2nd - North Lake Pole - Downtown Altadena (Lake Ave. & Mariposa St.) @ 1:00pm

December 2nd & 3rd - Teddy Bear Tea in The Lobby Lounge - The Langham @ 10am &1:30pm 

Decmeber 3rd - South Lake Holidayfest - Various Locations on South Lake Avenue @ 12:00pm

December 3rd - Castle Green Holiday Home Tour - The Castle Green @1:00pm 

December 3rd - Tree Lighting Ceremony in the Lobby Lounge - Lobby Lounge at the Langham @ 4:00pm 

December 4th-15th - Good Cheer Gifting Drive for Union Station @ One Colorado Old Pasadena 

December 5th - Hillsides Guild Holiday Celebration - Parkway Grill @ 6:00pm 

December 6th - Altadena Farmers' Market - Loma Alta Park @ 4:00pm 

December 6th - Santa Barbara Wreath Make & Take - Armstrong Garden Pasadena @ 6:00pm

December 9th - Christmas Tree Lane Lighting Ceremony Winter Arts & Crafts Festival - Altadena Library District 600 E. Maripost St. @ 2:00pm

December 9th & 10th - Sip. Shop. Eat! at the Collective Market - Allies in DTLA @ 12:00pm 

December 10th - Rose Bowl Flea Market - Rose Bowl @ 5:00am

December 16th - Holiday Sing-Along - Walt Disney Concert Hall @ 11:30am and 2:30pm

December 23rd - White Christmas Sing-Along - Walt Disney Concert Hall @ 3:00pm and 8:00pm 

December 29th to the 31st - Live on Green  - Pasadena Convention Center - Fri & Sat @ 10:00am, Sun @ 12:00pm

December 31st - Noon Year's Eve At Kidspace Museum - Kidspace Children's Museum @11:00am


Contract Corner 

Landlord Rights With Existing Tenants

If you are a landlord selling your property with an existing tenant, here are the regulations for gaining access to said property for the for purposes of selling.

Usually, with cooperative tenants you can simply gain entry with their approval. The Lockbox Addendum and Tenant Permission to Access Property C.A.R. form must be used to document permission to enter. In the case of a non-cooperative tenant you may arrange for entry for purposes of showing with a 24-hour verbal agreement along with additional requirements. The seller is required to provide the tenant with a Notice of Sale and Entry C.A.R. form which remains in effect for 120 days. In the event the notice is mailed, it must have been at least 6 days before the intended access which must be during standard business hours. Finally, the Agent showing the property is required to leave behind a business card behind.  

Rarely, an uncooperative tenant may continue to refuse entry regardless of the seller’s compliance of standard notice requirements. In such a scenario, the seller should consult with their attorney to determine their next course of action.

Navigating through the labyrinth of details and information of a transaction is exactly why you, savvy buyers and sellers, need an experienced team. The SARKISSIAN + PERERA GROUP is here to help guide you through this process and ensure that you achieve all of your real estate goals! 

Copyright© 2017 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of December 1, 2017. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals.

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