Proposition 90: Savings For Home Buyers Age 55 Plus

Ordinarily under Proposition 13 in California, the value of a home for property tax purposes is re-assessed to market level whenever a change in ownership may take place. This usually results in higher property taxes on the home buyers new home.

In November 1988, the state‘s voters approved Proposition 90, which is designed to induce greater turnover of homes owned by senior citizens. Proposition 90 may provide anyone over the age of 55 with relief from Proposition 13 by allowing them to move from one county to another without undergoing a change in their basic property taxes. El Dorado County is one of only a few in California participating in this tax saving program.

For more information contact us or view the State Board of Equalization site at http://www.boe.ca.gov/proptaxes/pdf/lta06010.pdf

Prop 90 – Another Reason to Move to El Dorado County

Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever a change in ownership takes place in California. This usually results in higher property taxes for the home buyer.

Proposition 90 provides homeowners who meet the requirements, to transfer the base year value from an original residence in any other county to a replacement residence in another county, providing the “gaining” county passed an ordinance authorizing the transfer.  El Dorado County is the only rural California county to adopt Prop 90.

Please let us know if you are over the age of 55 and would like more details about the provisions of this Intra-County Base Year Transfers (Prop 90).

 

 

 

Proposition 90 Ordinance: Transfers of Property Tax Base Aassessments

Ordinarily under Proposition 13, the value of a home for property tax purposes is re-assessed to market level whenever achange in ownership takes place. This usually results in higher property taxes for the homebuyer. 

In November 1988, the state‘s voters approved Proposition 90, which is designed to induce greater turnover of homes owned by senior citizens. The measure provides anyone over the age of 55 with relief from Proposition 13 by allowing them to move from one county to another without undergoing a change in their basic property taxes.

Proposition 90 is a “local-option” law; each county has the option of participating. If a county has adopted a Proposition 90 ordinance, it accepts transfers of property tax base assessments from other California counties. If the county that the homeowner is moving from does not have a Proposition 90 ordinance, this does not affect the eligibility of the homeowner.

El Dorado County is one of only a handful of counties participating in this tax saving program.  However, Prop 90 is due to expire in February of 2015. 

The Biggest Hurdles to Home Ownership

With mortgage rates still near historical lows, why aren’t more home owners making a move? Housing analysts blame student loan debt, overly strict lending standards, and lost equity as the leading culprits behind a sluggish housing recovery. But what do home owners say?

Mortgage information site HSH.com surveyed 786 home owners at the end of 2013 about their experiences when it came to finding and financing their home. The top six biggest hurdles to home ownership were identified as:

  1. Home prices (flagged by 23.5% respondents): Rising home prices are not just difficult for young home buyers. Home owners aged 50 to 59 reported the highest incidence of struggling with higher home prices.
  2. Down payment (22.9%): Those aged 18 to 29 reported the least trouble with down payments, while home owners aged 30 to 39 and 50 to 59 reported the highest incidence of down-payment struggles.
  3. No issues (20.9%): A significant portion of respondents said they don’t face any hurdles to home ownership, with older home owners reporting fewer hurdles than their younger counterparts.
  4. Credit score: 12.8%
  5. Interest rates: 12.6%
  6. Property taxes: 7.3%

Source: “Survey: What’s the Hardest Part of Affording a Home?” FOX Business (July 2, 2014)

Teachers Can Afford Only 17% of Calif. Homes

Housing affordability for teachers is in dire straits in the Golden State, according to a new study by real estate brokerage Redfin. The study found that 83 percent of homes in California are unaffordable on a teacher’s salary. Redfin analyzed average teacher salaries in markets in California and compared them with the median home price.

Only 17 percent of all homes for sale in the state are affordable to teachers. In some cities, the problem is even worse. In San Francisco, there isn’t one house on the market that teachers can afford on their average salary, the study showed.

According to Redfin’s data, the median list price in California is $485,000. The state’s 300,000 elementary, middle, and high school teachers have an average annual salary of $69,300. Using a general guideline that a monthly home payment should not exceed 28 percent of your gross monthly income, Redfin says that a teacher would likely not want to pay more than about $1,600 a month for a home.

“Given current interest rates, property taxes, home insurance, and home owners association expenses, a teacher can afford a $260,000 single-family home or condo,” Redfin says in its report. “Of the 50,559 for sale in California, just 17.4 percent are listed below $260,000.”

Redfin says that tight housing inventories are causing home affordability to slip in California. Its report breaks down what teachers can afford by county at:  “83 Percent of California Homes Unaffordable on a Teacher’s Salary,” Redfin Research Center (Feb. 25, 2014)

“Talking Points” about Vacation Home Ownership!

Being in the “Sierra Foothills,” it’s nice to share information like this. Owners of vacation homes, or those thinking of renting out their second homes as vacation rentals, must know the tax rules on rental income from second homes.

One of the best tax code’s freebies allows homeowners who rent their property for 14 or fewer days a year for rental income, tax-free. It’s available to anyone renting out a home, and the income doesn’t have to be reported on the owner’s tax return as long as the rental period is 14 or fewer days. The taxpayer can’t take depreciation or maintenance deductions but can deduct mortgage interest and property taxes on Schedule A.

Things get much more complicated if a home is “mixed use,” meaning the owner uses it himself and rents it out. In that case, he has to count the rental days and determine what percentage they are of the total number of days the property was used. That gives the percentage of expenses such as maintenance, utilities, property taxes, mortgage interest, and depreciation that are deductible from the rental income.

For more information about the tax rules of renting out a vacation home, please contact us or read more in this article: http://on.car.org/Rm8SdY

Lower Property Values, “reduce Property Taxes”

If you own a home in California, chances are the assessed value of your property just dropped. County assessors statewide are releasing this year’s property tax rolls – the total assessed value of all properties in a given county – and most are lower than last year. 

Sacramento County’s tax roll dropped nearly 2.2 percent to $128.8 billion. Yolo County’s is down about 1.9 percent. And El Dorado County and Placer County both saw the value of their taxable property drop more than 6 percent. The falling values represent good news for many homeowners, who will see lower property tax bills this October.

However, the second straight year of shrinking tax rolls is another blow to local governments that rely on property tax revenue to fund programs and services. 

“It’s a significant hit,” said Mike Applegarth, a principal analyst in El Dorado County. “It translates into people (losing their jobs). It takes people to deliver services.” 

Last year marked the first time most counties saw property tax rolls drop since voters approved Proposition 13 in 1978. That’s because the market value of many properties dropped below the assessed value. In such cases Proposition 8 – a tax measure passed as a companion to Proposition 13 – requires assessors to temporarily lower the taxable value of properties until the market value climbs again. 

Market values have continued to plummet, and as a result, most county assessors have continued to lower the taxable value of properties in their region. Sacramento County Assessor Ken Stieger’s office just lowered the assessed value of another 38,000 properties. In all, owners of nearly 154,000 Sacramento County properties are paying less in taxes because the market value is below the previous assessed value. 

This year, there is a second factor at work as well. Under state law, counties are allowed to raise property taxes by up to 2 percent a year as long as the overall cost of goods and services is rising – in other words, during periods of inflation. In a time of deflation – when the costs of goods and services are falling – they are required to lower property taxes. 

For the first time since 1978, that scenario is playing out. So even homeowners whose property is still worth more than when they bought it will see a quarter percent decrease from last year in its assessed value. That should amount to $2.60 less in taxes per $100,000 of assessed value, according to the State Board of Equalization. 

“It’s the first time ever since Proposition 13 and probably the last time in our lifetime,” Stieger said.

Article provided by Ken Calhoon, Broker in Placerville, California.