Senior Home Buyers - Save Their Property Tax Base in Riverside County
by John Occhi
Riverside County Board of Supervisors took a big step yesterday (August 20, 2013) in attracting Senior Home Buyers to relocate to Riverside County by enacting Props 90 & 110 which allows the Sr. Citizen (age 55 plus) to transfer their "factored base year assessments" to a home in Riverside County an pay the taxes at the assessed value of the old real estate.
This has always been the case for a Senior selling a home in Riverside County and buying another here in the county. Now, we will attract Seniors from across the state to relocate to Riverside County without having to worry about high property taxes.
COUPLE POINTS OF CLARIFICATION
To clarify, "factored base year assessment" is the taxable amount the homeowner is paying. Typically, it is based on the purchase price plus an annual increase on the assessed value of 2%. So, in theory, if a homeowner purchases a home for $100,000 the base year assessed (taxable) value is $100,000. The second year the value would increase by 2% to $102,000 followed by another 2% increase the following year to $104,200. Each year the base value will increase by 2%.
During the 'great recession' of 2007, many homeowners received 'temporary reductions in value'; meaning that if a home was assessed at $500,000 but the fair market value was only $300,000 the Riverside County Assessor had the right to reduce the Assessed Value on a temporary basis. Many of these reductions happened automatically, at the direction of the Riverside County Assessor while others were appealed before the Assessment Appeals Board. Either way, the result was the same - a 'Temporary Reduction in Value'. As property values start to increase, I am certain we will see the Assessor’s Office start to increase the values of those properties that had received the temporary reduction. In no case, can the assessed value be increased more than the 'factored base year assessment' (Base Year Value plus 2% compounded annually.)
Another point that should be clarified is the taxes paid will not be the same, only the 'factored base year assessment' is transferred. So, if a Senior Home Owner sells a home in Los Angeles County that was purchased 20 years ago and has a 'factored base year assessment' of $280,000 (despite selling it for $1,000,000) and purchases a home in Temecula for $400,000 the new home will only be taxed on $280,000. Now, if the tax rate for the Los Angeles home was 1.25% ($3500 per year) and the new home has a higher tax rate of 2% ($5600 annual tax bill) the relocating Senior Home Buyer will be responsible for the taxes on the $280,000 at 2% per year.
For the record, Prop 90 applies to Senior Homebuyers, age 55+ and Prop 110 applies to Disabled Homebuyers. Other than the Class distinction, I am not aware of any other differences between these two laws - but I am not an attorney, if you really need to know more, please consult with your own legal counsel.
MIXED FEELINGS
While many feel that this is a great thing for our local economy this has not always been the case. Prop 90 was voted into law in 1988 and Prop 110 was voted into law in 1990. In 1995, Riverside County Board of Supervisors rescinded the law because of fear of loss of property tax revenue.
The re-implementing proposal was jointly sponsored by Supervisors John Benoit and Kevin Jeffries who believe the laws in place would attract more retirees to the county.
Last month, during a public hearing on the ordinance in July, Inland Valley Association of Realtors' President Doug Shepherd referred to studies showing how Prop 90 could generate an additional $127 million in annual economic benefits and lead to 676 new jobs a year.
"Thousands of new homes will be built, and there will be greater demand for them," Shepherd told the board, adding that Los Angeles, Orange and San Diego counties already have similar ordinances on their books.
Supervisors, who jointly proposed re- implementing propositions 90 and 110, said having the provisions in place would attract more retirees to the region. The supervisors touted the potential collateral economic benefits.
Initially Supervisor Jeff Stone opposed the proposed ordinance during meetings in May and June, convinced that the county stood to lose more than it might gain by sparing some home purchasers from paying real estate taxes that reflect the actual market value of their properties.
During the recent board's July 30 meeting, however, Stone said he had changed his mind after learning that his paternal grandmother had moved to Riverside County in the early 1990s to take advantage of Prop. 90 benefits.
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