What Does Prop 5 Mean For Home Owners and Seniors
Proposition 5
Property Tax Transfer Initiative
This initiative, now on the November 2018 ballot, would allow those aged 55 and over to sell their home and buy another, and retain some or all of their Proposition 13 property tax savings.
Why is it needed?
Under proposition 13, homeowners are protected from rapidly increasing property taxes. However, seniors, who are often on a fixed income, fear they will not be able to afford a big property tax increase if they sell their existing home and buy another one, discouraging them from ever moving. As a result of this “moving penalty”, almost three-quarters of homeowners 55 and older haven't move since 2000. This initiative will allow them to sell their home while keeping some property tax protections, and therefore create home ownership opportunities for young families.
How do property tax assessments work now?
The amount any homeowner pays in property taxes is based on the assessed value of their home at the time of purchase. Generally, Proposition 13 limits property taxes to 1% of the assessed value at the time of purchase even if the value of the property subsequently increases.
Unfortunately, homeowners lose their Proposition 13 property tax savings when they move to another home.
Under another law, Proposition 60, senior homeowners - defined as 55 years of age or older - are allowed to transfer their property tax bases to another home in the same county so long as the purchase price of the replacement home is equal to, or less than, the sale price of the original residence. Under Proposition 60, a senior homeowner is limited to making only one such transfer over the course of his or her lifetime. And, if the spouse of a senior homeowner has already transferred a property tax base, that senior homeowner is disqualified from making another transfer of the tax base.
Proposition 90 is an extension of the original Proposition 60 program. Proposition 90 allows senior homeowners to transfer their property tax base to a home in a different country so long as that county accepts such transfers (at last count, only 11 counties in California are accepting transfers from other counties).
Propositions 60 and 90 are relatively limited. That’s where Proposition 5 comes in.
How will the Initiative work?
Prop 5 would allow homeowners 55 years of age or older to transfer some of their Proposition 13 property tax base to a home of any price, located anywhere in the state, any number of times.
What’s next?
Prop 5 will now appear on the November 2018 ballot to decide it’s fate.
Where can I find more information?
California Association of Realtors
SOURCE: COMPASS