San Francisco Chronicle, December 16, 2013
Today I have answers to readers' questions about property taxes, Covered California and college savings.
Q: Dee B. has a question about transferring property tax values from one house to another under Proposition 60. "What criteria are used to determine if a home is the primary residence of the homeowner? For example, does the owner have to live in the home any two out of the five years before it's sold?
"Also, how does a homeowner demonstrate that she is treating the home as a primary residence? Does she need to save all of her PG&E bills or bank statements?"
A: Dee is referring to the proposition that gives California homeowners 55 and older a one-time chance to sell a primary residence and transfer its property-tax assessment to a new one of equal or lesser value in the same county (or in one of eight counties that accept incoming transfers of base-year values). The replacement property must be purchased or built within two years - before or after - the sale of the original property.
The proposition was designed to help longtime California homeowners downsize without giving up the low property-tax assessment they enjoy in their existing home.
There are lots of rules, many of which are spelled out on the California Board of Equalization's website ( http://boe.ca.gov/proptaxes/faqs/propositions60_90.htm).
These FAQs do not answer Dee's question, but a spokesman for the board said, "There is no statutory time period that establishes residency for Prop. 60 purposes. The person must have been living in the original home at the time of the sale (of the original property) or within two years of the purchase of the replacement property."
A 2006 letter from the board to county assessors explains that "a principal residence is a person's true, fixed, and permanent home and principal establishment to which the owner, whenever absent, intends to return. Proof of residency may include vehicle registration, voter registration, bank accounts, or income tax records."
Q: Joanne C. has a question about health care insurance purchased through Covered California. "I'm self-employed, so I don't know what I will earn in 2014. It appears that if I state a lower-than-expected income and earn more, I will need to reimburse (the government) for additional premiums, but I don't think I will need to reimburse for higher co-pays & deductibles. Is that true?"
A: Yes. People who make between 138 and 400 percent of federal poverty level for their household size can get a federal tax credit to reduce their health insurance premiums. The premium is based on their expected 2014 income.
If they chose to receive this credit throughout the year, to reduce their monthly premium, and end up earning more than they estimated when they applied for coverage, they may have to repay all or some of the premium when they file their 2014 taxes.
Little known fact: People who make between 138 and 250 percent of the poverty level can also get a subsidy to offset their co-payments, deductibles and other out-of-pocket costs. They will get this subsidy only if they purchase an enhanced silver plan.
"Unlike premium tax credits, federal cost sharing subsidies that reduce co-pays, co-insurance, deductibles and out-of-pocket maximums do not need to be repaid if an enrollee's actual income for the tax year is higher than she expected at the time she enrolls. Income estimates at the time of enrollment are subject to verification by Covered California," says Laurel Lucia, a policy analyst with the UC Berkeley Center for Labor Research and Education.
Lucia is not sure why these subsidies do not have to be repaid. "My guess is that it would be administratively too difficult," she says.
Q: Jean G. writes, "I want to set up an education fund upon the birth of a nephew. He will be born in Michigan. My preference would be that I do the initial contribution, but that the parents and grandparents can contribute over the years until college.