It would be worthwhile, for once, to provide interested property owners with a breakdown of little-known details on the property tax relief system in California. The California Legislature has implemented numerous property tax relief measures that many residents know very little or nothing at all about, such as a CA parent-child transfer for example. Furthermore, some of these programs are complicated, with voluminous forms to fill out — which is why consulting with a tax attorney, a property tax specialist or trust lender is crucial, when inheriting a home in CA or moving from one home to another.
However – despite mixed feelings from property owners, that is what the County Assessor’s office is for, besides happily taking your cash – to assist with difficult, complex issues. Unless you have deep pockets and can get all of your tax questions answered by a pricey tax attorney… which most middle class residents are not in a position to do.
For example, claims have to be filed with the County Assessor for any new construction, to ensure this will be excluded from property tax reassessment – if it concerns modification of any existing structures, for instance to make sure a certain structure is more easily accessed by anyone who is physically disabled or impaired in any way.
Disaster Relief Protections & Exclusions
Properties that have been substantially damaged or destroyed by a so-called “natural disaster” such as wildfire, a massive flood or an earthquake can be reassessed to determine if the damage has reduced the value of the property. If the county where such a property is located has a “disaster relief ordinance”. Written claims for this type of relief has to be filed with a County Assessor inside the time-frame allotted in the ordinance paperwork – or within 12-months from the date the property was damaged or destroyed (whichever is later).
The reduced value of a damaged property like that remains reduced until the property is completely restored. At that point, the factored base year value can be restored – as long as it’s similar to the way the property looked before it was damaged. If a county has no disaster relief ordinance, a taxpaying resident can ask the County Assessor for a “Proposition 8 reduction in value”. But only if the natural disaster occurred in an area validated by the Governor as an area in a state of emergency and the resident decides not to restore the damaged property.
The taxable value of damaged or destroyed property can be transferred to a reasonably comparable replacement property that is in the same county and was purchased constructed within 5-years after the natural disaster. The County Assessor will accept claims for this exclusion.
Replacement Residence Transfers
The taxable value of a principal residence that is genuinely damaged or destroyed can be transferred to a “replacement residence” in another county, as long as the alternative residence is in a county that has an ordinance permitting taxable value transfers like this.
Los Angeles County, Orange County, San Diego, San Francisco, Santa Clara, Contra Costa, Modoc, Solano, Sonoma, Sutter, and Ventura Counties have all signed onto ordinances that accept transfers of base year value. And naturally, all County Assessors accept claims for this type of exclusion.
Parent-Child and Grandparent-Grandchild Exclusion
The purchase or transfer of a principal residence and the first $1 million of other real property between parents and children is not subject to reassessment. Under the CA parent-to-child exclusion, to avoid property tax reassessment, CA parent-child transfer allows for a full year to move into a home inherited from a parent, as long as it is a primary residence, and the parent had used it as a principle residence as well – enabling a beneficiary to transfer parents property taxes on a standard property tax transfer when inheriting property taxes.
At least one beneficiary can keep parents property taxes, as well as being able to buyout a sibling’s share of inherited property on a transfer of property between siblings, in concert with a Proposition 19 enabled CA parent-child transfer and an irrevocable trust loan for homeowners and beneficiaries inheriting property in California.
The CA parent-child transfer and exclusion also applies to property transfers from grandparents to grandchildren when both qualifying parents are deceased, subject to certain limitations. As usual, claims for this exclusion have to be filed within a certain time-frame.
Eminent Domain Exclusion
Eminent Domain is the right of a government to expropriate private property for public use, with compensation. The taxable value of property may be transferred to a comparable replacement property if the person acquiring the real property has been displaced from property by eminent domain proceedings.
This is basically an acquisition by a public entity, or by some sort of pointed government action that resulted in an adverse legal judgment of some kind. The replacement property does not have to be located in the same county as the property that was taken; or as it’s referred to in polite company, as “removed”. Claims for this exclusion has to be filed with the County Assessor within four years of the displacement.
Property Tax Exclusion for Residents Age 55+ or Disabled
People over the age of 55 or who are severely and permanently disabled can transfer the taxable value of their principal residence to a replacement property if it is of equal or lesser value, located within the same county, and purchased or newly constructed within two years of the sale of the original residence. This type of unique property tax relief can be utilized only once in a lifetime.
There is one exception to this one-time-only limit. If a candidate for this exception proves to be permanently disabled, after transferring the taxable value, and is under age 55, he or she can transfer the taxable value a second time under the disability requirement if the move is directly related to the disability.
Lastly, the taxable value can be transferred to a replacement property located in the same county, or to a replacement property in another county – as long as that property is in a county that has an ordinance that allows transfers like this. Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura Counties all have ordinances that allow transfers under this program.
However, claims have to be filed with the County Assessor inside of three years after the purchase of the replacement property, or after the completion of construction of the replacement property. It’s critical to pay attention to this deadline.
The construction or addition of a solar energy system (with the exception of a solar swimming pool heater or hot tub heater) is excluded from being viewed as “new construction”, and cannot be charged property tax until the property changes ownership.