A new client called today and inquired about the California proposition that enables an individual or couple to transfer their favorable tax basis to another property they acquire as their primary residence. This client just turned 55 and had lived in their current property for 10 years. Their property tax basis is $300,000, but their home is now worth $900,000. Wouldn’t it be nice to transfer that $300,000 tax basis to a new $800,000 property? It gets better for them because their current property has been their primary residence enabling them to take a tax exemption on their capital gains up to $500,000 on the sale!(up tp $250,000 if you are single)
Per the Los Angeles County Assessor’s Office website on Proposition 60 and 90, “in most cases, these constitutional tax initiatives allow senior citizens to transfer the trended base value from their current home to a replacement property if certain requirements are met. This may result in substantial tax savings.”
“If you or your spouse who resides with you is age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the trended base value to your new property.”
“This is a one-time only benefit. You must buy or complete construction of your replacement home within two years of the sale of the original property. Both the original home and the new home must be your principal place of residence. A claim must be filed within three years of purchasing or completing new construction of the replacement property. If a claim is filed after the three-year period, relief will be granted beginning with the calendar year in which the claim was filed. Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again.”
Licensed Real Estate Salesperson disclaimer: This information is not tax or legal advice. Please consult a tax and/or legal adviser.
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