I was recently a guest on the talk show, “The American Dream,” where I spoke to host Amy Scruggs about a few key issues affecting the San Diego real estate market. Today I want to fill you in on the discussion so that you can stay in the know.
Midterm elections are coming up—let’s talk about property taxes.
There’s something interesting coming up on the ballot called Prop 5. This proposition specifically deals with sellers over the age of 55.
Many are familiar with Prop 13, which preserves people’s property tax bases at 1% of what they purchased the property for.
Older clients might also be familiar with Props 60 and 90, which allow them to transfer their tax bases when they sell a house. For example, a client of mine bought their house on Scripps Ranch about 25 years ago. They’ve since retired and want to get back to the beach. The house they’re going to sell was purchased for $500,000—25 years later, they’ll probably be able to sell it for about $1 million. To get back to a single-family home on the beach, $1 million won’t cut it, so they’ve got a couple tough choices to make: They can either find something for less than $1 million and keep that $500,000 tax base, or they can find their dream home, say, for around $1.2 million. In that second scenario, their tax base is $1.2 million. As someone who is retired, possibly on a fixed incoime, that’s a huge hit.
Pitched by the California Association of Realtors, the exciting thing about Prop 5 coming up in the November elections is that it will change the process of transferring your tax base. Instead of transferring your tax base once, as with Props 60 and 90, you’ll be able to transfer it several times and even to a property that’s more expensive than the one sold.
There are some aspects to the calculations that will adjust it up a bit, but you won’t take nearly the hit you would have on a newly assessed property of $1.2 million. It’s a game-changer.
This is great advice that can really help people know how to navigate the process and give them some hope and opportunity.
It absolutely could do a lot for San Diego, where inventory is very low. If passed, Prop 5 should really open up a lot of inventory, since there are a lot of seniors sitting in their houses because they can’t afford to move. I am very grateful to have been a guest on “The American Dream,” and I’d like to thank Amy Scruggs for hosting the segment.
If you have any questions regarding Prop 5 or property taxes in general, please feel free to reach out to us at the Max Folkers Real Estate Team. We’d be happy to help.