M Paquette
Moderator Emeritus
Some California counties have agreements to allow people to buy a house in a different county, even, and they maintain their low property tax basis. I have a friend who held one of the two highest positions at a University of California school. They had owned their house for a long time and paid very little property taxes. After he retired and started drawing his pension (presumably over $250,000 inflation adjusted per year for the rest of his life), they moved to a different county and maintained their very low property tax basis on their new home. (how nice!)
Those would be the Proposition 90 'tax treaties'. Only 8 counties allow portability between counties. They were set up for precisely this case, where a retired person was 'downsizing' their home and taking out some of the equity from the old home for retirement. Proposition 60 allows 'portability' within a county. There are a bunch of eligibility requirements:
The proposition appeared after California lost a case involving the taxation of withdrawals from tax-sheltered retirement accounts, wherein the state lost it's attempt to tax withdrawals from accounts made in other states of funds originally earned in California. Yeah, really. Something about inhibiting a pesky constitutional right of free movement among the several states.
- You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
- The replacement property must be your principal residence and must be eligible for the homeowners' exemption or disabled veterans' exemption.
- 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.
- The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
- 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.
- 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.
There was a concern that retirees would flee California for some strange reason...