ALERT! San Francisco Prop G
UPDATE! Cooler heads prevailed and San Francisco’s Proposition G was defeated at the polls November 2, 2014.
In November a dark cloud called Prop G, the “Speculator Tax”, will be on the San Francisco ballot which, if passed, will increase the transfer tax on property owned for less than five years. It will effect 2-30 unit buildings including single family homes with one or more in-law units even when they are not legal units! This is a poorly written legislation with few considerations and exceptions.
For instance people who come to own a property through the death of a parent will have one year from the date of the parent’s death to sell the home even though the probate process can often take two years. These people will often need to sell because of circumstance and be forced to pay Prop G’s onerous tax even though they are not speculators
The law will be retroactive and will effect anyone attempting to sell a property they bought in the past five years even before the legislation becomes law…terrible.
The desire of the legislation is to stop people from flipping homes and in the process of the flip evict or Ellis Act tenants out of the property. Contrary to what people may think the number of people actually flipping property is small, but the number of people who will suffer under this legislation is very very large.
The tax rate will be on the total sale price not on the profit, or the difference between the purchase and sale price. As an example, a home with an in-law purchased for $900,000 and sold the following year for $1,000,000 will trigger a transfer tax of 24% ( $240,000). The gross profit not including the cost of sale is $100,000 ($1,000,000 minus $900,000) and the transfer tax will be $240,000! Holy S***!
San Francisco’s Prop G Tax will work like this:
When sold in the first year of ownership: 24% of the gross sales price.
When sold in the second year of ownership: 22% of the gross sales price
When sold in the third year of ownership: 20% of the gross sales price
When sold in the fourth year of ownership: 18% of the gross sales price
When sold in the fifth year of ownership: 14% of the gross sales price
Prop G will be terrible law if passed in November. Do your part to make sure it doesn’t become law!
If you are considering selling a property effected by Prop G consider selling before January 1, 2015. Give me a call right away!