Are you concerned about the tax effects possibly impacting the sale of your home should you desire to move in California? There are two things to consider in this regard:

1.     California Proposition 90; and
2.     Internal Revenue Code §121.

Proposition 90 provides for the transfer of your property tax base within the county you currently reside in, as well as from one county to another county where this Proposition is recognized. Proposition 90 is currently recognized in the following ten counties: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne and Ventura. You satisfy the requirements of Proposition 90 if:

(Continued from Establishing Trust Together Newsletter)

1.     You or your spouse is over age 55;
2.     The sale of your previous principal residence and the purchase of the new principal residence is accomplished within two (2) years;
3.     The new residence is of “equal or lesser value”. The original principal residence must be eligible for the Homeowner’s Exemption or Disabled Veteran’s Exemption and be appraised at its current fair market value at its date of sale. The replacement principal residence fair market value, not the purchase price, is utilized for “equal or lesser value”.

In addition to these requirements, the San Diego Assessor’s Office will require the following:

1.     Proof of Sale–Escrow documents for sale of the original property;
2.     Proof of Age to support one spouse over age 55;
3.     Copy of Proof of Homeowner’s Exemption existing at date of sale. You may utilize a previous homeowner’s exemption even though you are renting your principal residence;
4.     Original Residence Tax Base–you must provide a copy of your County Assessor’s Tax Base Statement to the New County Assessor;
5.     Complete a claim form under Proposition 90.

In regards to the Internal Revenue Code §121:

1.     You must have owned and utilized the home for two (2) of the last five (5) years at date of sale as your principal residence;
2.     You may exclude $500,000 from the capital gain determined from the sale of the property if you file a joint return as spouses, or $250,000 if you file as a single taxpayer.

Typically sales costs are deducted to from the gross gain which reduces the capital gain on the sale. This is, of course, reflected in the escrow property sales documents.

If you have issues in this regard, please contact my Office Manager, Hannah at (858) 792-0909 for an appointment.