June-July 2021 Newsletter

By Capital Advantage, Inc. Financial Advisor, Ben Agron, CFP®

Property taxes in California can be a big expense and without past legislation like 1978’s California Proposition 13 (a property tax limitation initiative), many retirees could have—and would have—been easily priced out of their homes.

Recently, in late 2020, California voters approved to amend the property tax rules by passing Proposition 19 (known as the Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act).

Without getting into the weeds of Prop 19, here are 3 main takeaways:

1. The biggest winners are California homeowners aged 55 and older.

Qualified homeowners may now move anywhere in California and transfer their current tax basis (taxable value of their primary residence) regardless of the value of the new primary residence—even if the new residence is greater in value.

Previously, Prop 13 limited tax basis transfer to within the same county (or to one of 10 counties that accepts intercounty tax basis transfers) and only to a replacement property of equal or lesser value.

(click here to read more)

Did you know? If you are required to enter assisted living or a nursing home as part of a physician’s plan of care, a portion of the cost may be tax-deductible.

According to the IRS, deductible medical expenses may include, “payments for inpatient hospital care or residential nursing home care, if the availability of medical care is the principal reason for being in the nursing home, including the cost of meals and lodging charged by the hospital or nursing home. If the availability of medical care isn’t the principal reason for residence in the nursing home, the deduction is limited to that part of the cost that’s for medical care.” Additionally, “you may deduct only the amount of your total medical expenses that exceed 7.5% of your adjusted gross income.”

We recommend contacting your tax preparer to determine whether an expense is deductible.

^{Source: https://www.irs.gov/taxtopics}