Reform Protects Senior Citizens
All senior citizens in California will benefit from the elimination of both sales taxes and existing property taxes under the proposed reform. In addition, like all other Californians, senior citizens will not pay state income tax on the first $150,000 of their annual income.
Because they do not own land, senior citizens who rent apartments, houses or mobile home spaces will not pay the tax on the rental value of land which will become the new primary source of public revenue. Thus, California’s many senior citizens who rent their living quarters will be major beneficiaries of this reform.
California homeowners aged 60 or older will be able to defer until July 1, 2020 any land tax in excess of the property taxes levied on their principal residence in the 2010-2011 fiscal year. For example, if the property taxes levied on a senior citizen’s home in the 2010-2011 fiscal year amount to $2,400, and if the the new land tax obligation on that house is $3,600 in the first year of the reform, then the homeowner will have the right to defer payment of $1,200 of that $3,600 until July 1, 2020.
The same right of deferral will be available in the second year of the reform and in each following year until July 1, 2020. Any homeowner who turns 60 years of age after July 1, 2011 will also be eligible to defer land taxes in a similar manner from the date of their 60th birthday until July 1, 2020.
Thus, in the first year of the reform, senior citizen homeowners who take advantage of this deferral provision will pay no more taxes on their principal residence than they did in the year preceding the reform and will also benefit from the elimination of sales taxes and from the exemption of the first $150,000 of their annual income from the state income tax. The same will be true in the second year of the reform and in the third year, and for each year through July 1, 2010.
The tax reform initiative also gives the Legislature the power to extend the July 1, 2020 payment date for taxes on land rental value which have been deferred by seniors.
Many homeowners over the age of 60 with the financial means to do so, especially those whose savings from the elimination of existing property taxes and sales taxes and the $150,000 income tax exemption exceed the amount of the new land tax levied on their home sites, will likely pay the full amount of the land rent tax in order to avoid the accrual of interest on the deferred tax balance.
However, due to the right of deferral, no senior citizen homeowner will be forced to sell their principal residence in the first eight years of this reform due to an increased tax burden. This extended deferral period also gives senior homeowners an opportunity to make plans to reduce their tax burden in the future.
The tax reform initiative allows non-profit senior living facilities and communities to retain their present exemption from property taxes such that their land used for housing seniors will also be exempt from taxes on its rental value. Seniors will usually be able to find houses to purchase on sites which have relatively low rental value, and seniors who choose to rent will not pay land rent tax at all.
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