As life circumstances change, many people find themselves in situation where their large Seal Beach home has become more than they need or can care for. Similarly people that own rental property for a long period of time find that they are ready to retire from the business of dealing with tenants and move on. At this crossroads, what options are available?
For people that find the size of their home exceeds their needs or has become a burden, the option of selling to downsize and retain their property tax base is a popular option. Under proposition 60/90, people over the age of 55 who are purchasing a replacement property of "equal or lesser value" can qualify to transfer their tax base.
Additionally the replacement property must be your principal residence and must be purchased two years (before or after) the sale of the original property. As of November 20, 2014 only ten counties have passed an ordinance authorizing intercounty transfers. Several other stipulations apply and it is recommended that youcontact your local Real Estate professional to determine if you qualify.
If you own rental property and are ready to retire from the business of dealing with tenants, you have a couple options available. If you reside in the building, you can qualify for the transfer of your tax base assuming you meet the aforementioned criteria. In most cases, the value of rental properties has skyrocketed in recent years due to demand for beach close living.
If you do not reside in the building, the option to use 1031 tax deferred exchange is the most popular way to sell. In this scenario, you postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Both the relinquished property you sell and the replacement property you buy must meet certain requirements.
Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States.
While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. To learn more about this criteria and find out if your Seal Beach property qualifies for a 1031 exchange, it is recommended that you contact your local Tax & Real Estate professional.
In both cases you'll want to determine the value of your home or rental property. To do so, simply visit the property valuation page HERE