September 22, 2000
CALIFORNIA'S SENIOR CITIZEN PROPERTY TAX RELIEF
By: John Moran, Research Analyst
You asked for a description of California's property tax relief programs for senior citizens.
California has three senior citizen property tax relief programs:
● the property tax assistance program provides qualified low-income seniors with cash reimbursements for part of their property taxes;
● the property tax postponement program gives qualified seniors the option of having the state pay all or part of their property taxes until the individual moves, sells the property, or dies; and
● the replacement housing program allows seniors to sell their residence, buy a new one of equal or lesser value, and transfer the old residence's assessed value to the new home (this enables them to keep the property tax ceiling obtained under Proposition 13 that is normally lost when purchasing a new home).
PROPERTY TAX ASSISTANCE PROGRAM
Also known as the Gonsalves-Deukmejian-Petris Property Tax Assistance Law, this program provides direct cash reimbursements from the state to low-income seniors (62 or older), blind, or disabled citizens for part of the property taxes on their homes. It does not reduce the amount of taxes owed to the county (In California property taxes are collected at the county level). Applicants must file claims annually with the state Franchise Tax Board (FTB).
Aid is a specified percentage of the tax on the first $34,000 of property assessment. Assistance is determined on a sliding scale based on household income, with those earning lower incomes receiving more aid, and those earning at or near the maximum ($13,200 annually) receiving less. The FTB indicates the average assistance payment for fiscal year 1999-2000 was $132 for homeowners. This program also provides assistance for senior citizen or disabled renters.
In July, the governor signed into law an act providing a one-time doubling of assistance payments and a one-time broadening of the eligible income range.
PROPERTY TAX POSTPONEMENT PROGRAM
This program gives seniors (62 or older), blind, or disabled citizens the option of having the state pay all or part of the property taxes on their residence until the individual moves, sells the property, dies, or the title is passed to an ineligible person. The applicant's total household income cannot exceed $24,000 and the applicant must have at least a 20% equity interest in the home. Repayment of all taxes is due when the property is sold or title is transferred.
To obtain the postponement, an applicant must submit a claim to the state controller's office. Then a “senior lien” is placed on the property. Interest is charged on the postponed taxes and is added to the amount of the lien. Participants can choose to pay all or part of their taxes at any time.
Approved applicants receive a certificate of eligibility that they sign and present to the county tax collector. The collector accepts the certificate in lieu of the property owner's tax payment, and the state pays the county for postponed taxes.
This program is separate from the property tax assistance program, but qualified applicants can participate in both. Any tax assistance money a participant in the postponement program receives is deducted from the amount of the state's lien on the property.
REPLACEMENT HOUSING PROGRAM
This program allows individuals who are at least 55 years old to sell their residence, buy a new one of equal or lesser value, and transfer the old residence's assessed value to the new home. The new home must be purchased within two years of selling the previous one and must be in the same county. The program is available to anyone 55 and older, regardless of income or wealth.
By preventing the market-value reassessment of the replacement home, the program provides tax relief to the extent the replacement home market value is greater than the assessed value of the previous home. Under Proposition 13 property is reassessed at market value only when it is sold (see attached Office of Legislative Research report, 97-R-1337, for a detailed description of Proposition 13).
Proposition 13, adopted in 1978, created an unintended incentive for seniors to hold on to larger homes as they become “empty nesters,” since moving to a new home would trigger a market-value assessment and the consequent tax increase. The replacement-housing program, adopted in 1986, is a means of extending Proposition 13 tax limits to a new home under these conditions.