Parent & Child Reassessment Exclusion

Overview

Parent & Child and/or Grandparent-Grandchild Reassessment Exclusion

Proposition 19, which takes effect on February 16, 2021, changes the criteria for excluding from reassessment a transfer between a Parent and a Child, or from a Grandparent to a Grandchild. The Change in Ownership date determines if Proposition 19 applies, or the prior rules from Proposition 58/193 apply. In cases of inheritances, the Change of Ownership date is the date of death of the transferor; in cases of trusts, the Change in Ownership date is the date the trust became irrevocable; in cases of a sale of the property the Change in ownership date is the recording date. Where the transfer is evidenced by recordation of a deed or other document, the date of recordation shall be rebuttably presumed to be the date of ownership change. This presumption may be rebutted by evidence proving a different date to be the date all parties’ instructions have been met in escrow or the date the agreement of the parties became specifically enforceable.

If your Change in Ownership date is before February 16, 2021, this page provides the Proposition 58/Proposition193 criteria for an exclusion.

If your Change in Ownership date is on or after February 16, 2021, please visit Proposition 19 page for criteria of an exclusion.

The transfer of real property between parents and children or from grandparents to grandchildren may be excluded from reappraisal for property tax purposes. You must file a claim to determine eligibility.

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BOE-58-AH, Claim for Reassessment Exclusion for Transfer between Parent and Child Occurring before Feb. 16, 2021 BOE-58-AH, Claim for Reassessment Exclusion for Transfer between Parent and Child Occurring before Feb. 16, 2021
BOE-58-G, Claim for Reassessment Exclusion for Transfer from Grandparent to Grandchild Occurring before Feb. 16, 2021 BOE-58-G, Claim for Reassessment Exclusion for Transfer from Grandparent to Grandchild Occurring before Feb. 16, 2021

Parent-Child or Grandparent-Grandchild Reassessment Exclusions: Propositions 58 & 193

Proposition 58: Parent-Child Exclusion

Proposition 58 amended the California Constitution to exclude from reassessment certain transfers of real property (such as sales, gifts, inheritance) from parent to child or from child to parent, and reaffirmed existing statutes excluding transfers between spouses.

What is the effective date of proposition 58?
Proposition 58 applies to any transfer of real property between parent and child on or after November 6, 1986.

Who are the “Transferor” and “Transferee?”
The transferor is the current owner of the property being transferred. The new owner is the transferee.

Which transfers of real property may qualify?

  • Transfers between parent and child of the principal residence; and/or
  • Transfers between parent and child of the first $1,000,000 in assessed value of other real property.

Does the “first $1,000,000 in value” represent the current market value or the assessed value?
The value used is the Proposition 13 value (also called factored base year value) immediately prior to the transfer date. Basically, this would be the taxable value on the assessment roll.

Let’s explain these terms.

Proposition 13: A 1978 Constitutional Amendment controlling rising property taxes. It limited the assessed value of existing real property to the 1975-1976 assessed values, limited tax rates to one percent of assessed value (plus voter-approved surcharges), and limited inflation-based value increases to no more than two percent annually.

Base year: Either 1975 or the year when the property or portion thereof was purchased, newly constructed, or underwent a re-appraisable change in ownership by the current transferor.

Base year value: The 1975-1976 assessed value or the full market value of the home in the base year, typically the purchase price.

Factored base year value: The base year value, increased by no more than two percent (2%) per year. Also called the “Prop. 13 value.”

What is meant by “Child” under proposition 58?

  • Any child born of the parent, or
  • Any stepchild or stepchild’s spouse while the relationship of stepparent and stepchild exists, or
  • Any son/daughter-in-law of the parent, or
  • Any child statutorily adopted before the age of 18, or
  • Any foster child of a state-licensed foster parent.

What is meant by principal residence?
A principal residence is:

  • A dwelling for which the owner has been granted a homeowner’s exemption, in the name of the parent or the child, or
  • A dwelling occupied by a person who has qualified for a disabled veteran‘s exemption in California.

Note:
Only a reasonable portion of the land will be considered a part of the principal residence in the value calculation. If the land area exceeds the area reasonably necessary as a site for the residence.

How many parent-child transfers of a principal residence may qualify under proposition 58?
There is no limit. However, each transferred residence must qualify as a principal residence.

Must the property qualify as the principal residence of both the transferor and the transferee?
No. The residence need only qualify as the principal residence of the transferor.

May eligible family members combine their exclusion benefits?
Yes. For example, a mother and a father could combine their individual $1 million benefits to exclude from reassessment a transfer to their children of $2 million of value in real property that is not the parents’ principal residence.

Proposition 193: Grandparent-Grandchild Exclusion

Proposition 193 extends the Proposition 58 exclusion to certain transfers of real property from grandparent to grandchild. Proposition 193 was approved by voters on March 26, 1996, and amended Article XIIIA of the California Constitution.

Filing Deadlines for Prop. 58 & 193 Claims

The exclusion claim must be filed either (1) within three years of the purchase or transfer of the property, or (2) prior to the subsequent transfer of the property to a third party, whichever is earlier. However, if the claim is filed within six months after the date of mailing of the Assessor’s notice of supplemental or escape assessment (an assessment notice) issued as a result of the purchase or transfer for which the claim is filed, the claim will be deemed timely. Further, if the three year timeline has passed, and the property has not been transferred to a third party, the Assessor may grant the exclusion prospectively pursuant to an otherwise untimely claim, if certain conditions are met.

Post

Changes to Parent-and-Child and Grandparent-to-Grandchild Transfer Exclusions
(Effective February 16, 2021)

Current laws allow parents, grandparents and children to pass on the existing assessed values of their primary residence and other properties up to $1 million in assessed values without reassessment. However, under Proposition 19 these programs will be limited with fewer tax savings opportunities. See below for the chart developed by the State Board of Equalization to compare the current law and the effects of Proposition 19.

Parent-Child & Grandparent-Grandchild Exclusion

  Current Law Proposition 19

Principal Residence
  • Principal residence of transferor
  • No value limit
  • Residence and homesite (excess land may be excluded as “other property”)
  • Principal residence of transferor and transferee
  • Value limit of current taxable value plus $1,000,000 (as annually adjusted)
  • Family homes and farms

Other Real Property
  • Transferor lifetime limit of $1,000,000 of factored base year value
  • Eliminates exclusion for other real property other than the principal residence

Grandparent-Grandchild Middle Generation Limit
  • Parent(s) of grandchild, who qualifies as child(ren) of grandparent, must be deceased on date of transfer
  • No change: parent(s) of grandchild, who qualifies as child(ren) of grandparent, must be deceased on date of transfer

Filing Period
  • File claim within 3 years or before transfer to third party
  • File for homeowners’ exemption within 1 year of transfer

Implementing Statute
  • Revenue & Taxation Code section 63.1 (implements Propositions 58/193)
  • To be determined

Important Dates
  • Through February 15, 2021
  • Effective February 16, 2021

Alert! If you plan to record a deed before Proposition 19 becomes effective on February 16, 2021, please note that February 15, 2021 is President’s Day, a legal holiday, and our Office is closed. We expect a high volume of document submissions during that time, any discrepancies or errors found in the process may require additional time to clarify or correct, which may cause further delay on the recording timeline. Early recording is highly recommended. 

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BOE-19-G Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild Occurring on or after Feb. 16, 2021 BOE-19-G Claim for Reassessment Exclusion for Transfer Between Grandparent and Grandchild Occurring on or after Feb. 16, 2021
BOE-19-P Claim for Reassessment Exclusion for Transfer Between Parent and Child Occurring on or after Feb. 16, 2021 BOE-19-P Claim for Reassessment Exclusion for Transfer Between Parent and Child Occurring on or after Feb. 16, 2021