Want to move to Palm Springs but worry you won’t be able to afford it? If you’re over 55 and you live in certain California counties, consider Prop 90.
Proposition 90 is a 22-year-old initiative that enables homeowners 55 years or older to transfer the base year value of their principal residence in one participating county to a newly purchased residence in another participating county provided that certain requirements are met. Palm Springs is an ideal destination for retirement because it is in Riverside County, a Prop 90 particiant.
1. At the date of transfer of the original property, the transferor (seller) must be at least 55 years of age. (If married, only one spouse must be at least 55, but must reside in the residence; if co-owners, only one co-owner must be at least 55 and must reside in the residence.)
2. The replacement residence must be purchased or newly constructed within two years before or after the sale of the original residence.
3. The sale of the original residence must qualify for reassessment as the result of its transfer.
4. The principal claimant must have been (1) receiving, or eligible for, a Homeowner's Exemption or (2) have been receiving a Disabled Veteran's Exemption on the original and replacement residences.
5. The replacement residence must be "equal to or lesser" in current market value than the original residence. In general, "equal or lesser" than market value of a replacement dwelling has been defined as: 100% of market value of original property as of its date of sale if a replacement dwelling is purchased before an original property is sold; 105% of market value of original property as of its date of sale if a replacement dwelling is purchased within one year after the sale of an original property; 110% of market value of original property as of its date of sale if a replacement dwelling is purchased within two years after the sale of an original property. Additionally, 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 90 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.
6. The replacement property must be purchased in a county that participates in the Proposition 90 program.
7. The claimant and/or claimant's spouse can only be granted relief under this section once. Once this tax relief has been filed and received, neither the primary homeowner nor the spouse who resided with the primary homeowner can file again, even upon death or divorce. The only exception is if a homeowner becomes disabled after receiving this tax relief for age. Only then may one transfer the base year value a second time. The disclosure of social security numbers by all applicants is required. They are used by the assessor to verify the eligibility of persons claiming this exemption and by the State to prevent multiple claims in different counties. This claim is not open to public inspection.
Proposition 90 is a “local-option” law, meaning each county has the option of participating. Applications for Proposition 90 must be filed in the county where the newly purchased residence is located, and this must be a county participating in the Prop 90 program. Currently, the following counties participate in Prop 90 transfers: Alameda, El Dorado, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, Ventura.
Property tax can be an important component of one’s financial and retirement decisions. Prop. 90 was designed to allow homeowners 55 years or older to move closer to family, medical services or to downsize in an effort to reduce expenses. Without Prop 90’s protection, many homeowners would not be able to move and would be forced to stay in their homes due to the significant property tax increase incurred in moving. As with all major financial decisions it is highly advisable to contact financial planning and tax consultants before making any decisions.