TWO GREAT BENEFITS WHEN SELLING YOUR HOME
1) Exclude up to $500,000 in Capital Gains Taxes on the sale of your Principal Residence
Internal Revenue Service Code section 121 allows you to sell your primary residence and exclude from taxable income up to $250,000 (single taxpayers) or $500,000 (married taxpayers filing jointly) in capital gains if you have lived in your primary residence for at least 24 months out of the last 60 months.
You do not have to reinvest the proceeds from the sale of your primary residence into a new primary residence in order to qualify for Section 121 exclusion, and you can take advantage of this structure once every two years.
2) Take your Proposition 13 Tax Base with you
In California, Proposition 60 allows you to transfer your Property Tax Base to the replacement residence if one of the property owners is 55 or older on the day of transfer and you are purchasing a replacement residence within the county that is equal to or less than the home you are selling.
If you are moving to another county, you may still be able to transfer your Property Tax Base if the county you are moving to has adopted a Proposition 90 ordinance. Prop. 90 is a local-option law which means each county has the option to participate depending on a vote of the county board of supervisors. Each county can impose their own requirements to participate, so if you are planning on using Prop. 90, be sure to check with the county assessors office in the county that you are moving to before proceeding.
You can purchase the replacement residence up to two years after the sale of the original residence. If the replacement residence is purchased within the first year there’s a 5% inflation allowance, if the replacement residence is purchased more than one year but less than two years after the original residence is sold, there is a 10% inflation allowance.
As of June 5, 2015, the following eleven counties in California have an ordinance enabling the intercounty base year value transfer:
Alameda, Orange, San Diego, Tuolumne, El Dorado *, Riverside, San Mateo, Ventura, Los Angeles, San Bernardino and Santa Clara
For more information regarding Proposition 60 and 90, visit the California State Board of Equalization’s website at: