Price Law Firm APC

Parent – Child Exclusion from Property Tax Reassessment
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R. Sam Price, J.D., LL.M. Certified Specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization

Transfers of real property from parents to children (or children to parents) may be excluded from reassessment if a claim is filed and certain requirements are met.  This exclusion applies to a principal residence and up to $1,000,000 (taxable value) of additional real estate under Revenue & Taxation Code §63.1.  This provision of the law is called “Prop 58”.

In order to qualify for the parent-child exclusion, a claim form must be filed within 3 years of the date of transfer, or prior to the transfer of the real property to a third party, whichever is earlier.  If a claim is eligible, but not filed timely, the exclusion will begin with the calendar year in which the claim is filed.  Claims filed more than 60 days after the date of the second notice of potential eligibility for exclusion from change in ownership will be subject to a $175 processing fee. 

There are two types of qualifying transfers:

1)Transfers between parent and child of the transferor’s principal residence.

a) Note that for the principle residence, the property need only qualify as the principle residence of the transferor, not the transferee.

b) A principal residence is a dwelling for which the owner/claimant has been granted either a homeowner’s exemption (claimant owned and occupied as principal residence at the time of sale or within two years of the acquisition of the replacement property) or a disabled veteran’s exemption (claimant a veteran with service-related disability and a California resident on January 1 of claim year). Only a reasonable portion of the land will be considered a part of the principal residence if the land exceeds the area reasonably necessary as a site for the residence.

2) Transfers between parent and child of the first $1,000,000 in value of other real property.

a) 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.

b) 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.

The term “child” includes:

• Any child born to 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.

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