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Ways to Keep Housing Costs Down

It’s no secret that housing costs in Santa Cruz County are amongst the highest in the world, but fortunately there are multiple ways as the population ages that folks are able to keep the spiraling cost of living at least partially under control as they transition into retirement.

One of these tools that enables aging homeowners to do this is to transfer their tax base, one time only, under Proposition 60 or Proposition 90 on their primary residence. In order to qualify for a Prop 60 tax base transfer, a few criteria must be met:

First, either you or your spouse must be age 55 or older when the original residence is sold. Second, the market value of the replacement residence must be equal to or less than the market value of the residence sold. Third, the replacement residence must be purchased within two years either before or after the current residence is sold.

In order for a Prop 60 claim to be approved, the purchase must occur within the same County in which the first residence was sold. And your claim must be filed within three years from the date the replacement residence is purchased or newly constructed to receive full relief.

For those who decide they would like to move elsewhere, Proposition 90 allows the tax base transfer to be moved to a new county, so long as the new county allows it. A quick look online indicates that the cooperating counties are Alameda, El Dorado, Los Angeles, Orange, Riverside, San Diego, San Mateo, Santa Clara and Ventura.

Some decide not to sell at all, but rather to age in place where they have lived all along. This can often include redesigning the home with accessibility in mind. Sometimes the design includes adding an independent entrance and living quarters to one of the guest bedrooms to accommodate a caregiver, or to rent out in order to bring in a little extra income.

Going a step further, others take advantage of the loosening rules on “granny units”, and build an Accessory Dwelling Unit to rent out for a little more extra income. And some end up moving into the Accessory Dwelling Unit and renting out the main house to bring in a lot more income.

Another strategy is to get off the ownership merry-go-round altogether and just take the $250,000 or $500,000 capital gains tax exemption, pocket the equity and pay to live somewhere else. This might involve moving into a group living and care environment. I can also take the form of moving in with your children which can be done with increased privacy and independence by either the parent or the children paying to put in an Accessory Dwelling Unit on the family’s property. Or it might lead to the decision to move out of state to some other place where the cost of an average home isn’t on the high side of three-quarters of a million dollars.

Whichever direction you decide to take, the most important thing to realize is that you should consider the full range of options available before making a decision. And you should seek out the help of qualified people you can trust along the way to help you sustain a living situation where you can continue to enjoy life to the fullest.

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