The Parent-to-Child Exclusion (from paying current property tax rates) applies to any real estate purchases or transfers between parents and children, which occurred on or after November 6, 1986…
CA Parent-to-Child Exclusion Benefits
This exclusion prevents an increase in property taxes when real property is transferred between parents and their children in California. Formerly a crucial component of the wildly popular Proposition 58 parent to child property tax transfer, or parent-to-child exclusion, is still a key tax break in the tax relief bundle under California Proposition 19, as of Feb, 2021.
As we all know, this tax relief bundle works with property tax break components such as Proposition 13 transfer of property, the parent to child property tax transfer on an inherited home, or a fast 5, 6 day loan to an irrevocable trust under-pinning a transfer of property between siblings when buying out inherited property shares from co-beneficiaries.
These tax benefits mainly revolve around property tax transfer – namely the inheritance based ability for heirs to transfer parents property taxes, to keep parents property taxes long-term after inheriting property taxes as long as it’s California real estate… Making good use of the Prop 19 parent-child transfer working in conjunction with Proposition 19 parent-to-child exclusion benefits and related tax breaks.
What is the definition of a “child” for the purpose of this CA exclusion?
Natural children, children adopted before the age of 18, step-children (as long as the parents are still married), foster children, and sons- and daughters-in-law are considered children under this exclusion program.
Avoiding Property Tax Reassessment in California
In other words, property that will avoid a tax hike would be the transfer of property value from a “principal residence” to another primary residence – plus any other property valued up to $1,000,000 going to children. Properties will not be reappraised if the Claim for Exclusion from Reappraisal form is filled out properly, filed and approved by the Tax Assessor’s Office.
Real estate can be excluded from excluded from reappraisal when transferred between grandparent and grandchild, as long as a Claim for Exclusion from Reappraisal form is filed and approved by the Tax Assessor’s Office. And only if both parents of the grandchildren are deceased prior to property transfer to grandchildren.
Proper Claim Filing
Residences do not receive this type of property tax exclusion automatically. A completed “Claim for Exclusion from Reappraisal” is required. This form has to be finalized and filed with the Tax Assessor’s Office for approval.
Conversely, if you don’t file this claim the outcome is likely to be reassessment of your property taxes at fair market (i.e., current) rates. To avoid a supplemental tax bill, this claim has to be filed within 3-years of property transfer or the date the decedent passed away, prior to sale or transfer to a third party. A claim can be filed within 6-months after the mailing date of the supplemental notice or “escape assessment”.
If this claim is filed late, the exclusion can still be granted but no refunds will be received for prior years. It will be granted for the year the claim is filed as long as the property has not been sold to a third party.
Filing a Claim if Property Inherited From Parents is Sold
Reappraisal will occur for the period between the date of the death and the sale to the third party. A supplemental bill will be issued unless the heirs or beneficiaries apply and qualify for this exclusion.
Filing a Parent-to-Child Exclusion & Reappraisal for Seniors
Reappraisal Exclusion for Seniors is a one-time only tax exemption for residents age 55 and older to sell their primary residence and transfer its’ low property tax base to a replacement home. Since the sold property has to be reassessed or reappraised, heirs would not get a tax break from the Prop 19 parent-child transfer benefit.
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