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Keeping your Proposition 13 Exemption:

Keep your prop. 13 exemption when you sell and repurchase.
Older Californians who own a home used to have to worry that they would have to pay massive taxes if they bought a new home after selling their old one. However, a few years back, a couple of constitutional amendments were passed to the California Constitution that makes the sale and repurchase of a new home anywhere in the state possible for those 55+. Essentially, these two amendments together allow you to sell your home (if you are over 55), and repurchase without losing your tax base for your original home. This is a huge boon for older Californians. Let’s say you paid $90,000 for your home “back in the day,” and you have lived in it and paid it off. Your taxes are based on your purchase price, plus 2% annual add-on to your taxes. If you sell that home for $400,000 today, and then re-invest the money in another home of equal or lesser value, you keep the tax basis from your original home--$90,000. So if you sell for $400,000 and then repurchase a condo for $250,000, your tax basis is the $90,000, not the $250,000. You may be able to move this exemption from county to county within California and still maintain the tax basis from your original home, but not all counties allow the transfer from county to county, so you should check with the tax assessor for the county you are moving to. You are entitled to this exemption ONE time, you must purchase a home of equal or lesser value, you must be 55 or older when your first home is sold, and you must have lived in that home as your principal residence. These rules are a bit complex, so for the details (that’s where the devil lives--in the details), please contact your real estate agent or your assessor in the county in which you are located.

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