Nancy Manning
Realtor® - Capital Gains Tax Deferral Specialist - Certified Negotiation Expert

California Property Tax Transfer Rules
 
Ordinarily, when the ownership of California real property changes, the property is reassessed at its current fair market value and the new owner pays property tax based on the reassessed value. However, the law provides certain exemptions from reassessment and, in certain instances, allows a taxpayer to transfer the base-year value of the property to a subsequent property without being reassessed. As a result of Proposition 13, a taxpayer's base-year value could be much lower than if based on the fair market value of the property.
 
In addition, property which has had major renovations is normally subject to property tax reassessment. However, California law exempts certain property improvements from reassessment. Below is a brief overview of the rules, please contact me to review your specific situation as this memorandum is general in nature and slightly different facts may produce different results.
 
Sale and Replacement of Principal Residence by Taxpayer's
55 Years of Age or Older
Proposition 60
 
A taxpayer who is 55 years of age or older may transfer the Proposition 13 base-year assessment value of his or her principal residence to any replacement dwelling of equal or lesser value in the same county and sometimes, in another county.
 
A taxpayer has either two years before the sale of the original dwelling or two years after the sale of the original dwelling to purchase or construct the replacement property. The base-year value of the original property cannot be transferred to the replacement dwelling until the original property is sold. The taxpayer would pay taxes on the new residence based on its purchase price until the old residence is sold.
 
This exemption is available for any dwelling owned and occupied by a taxpayer as his or her principal residence and is limited to individual taxpayers only. A firm, partnership, association, corporation or other legal entity will not qualify. A taxpayer may take advantage of this law only once.
 
Property Tax Transfer Between Counties
Proposition 90
 
If any portion of the replacement dwelling, or any portion of the land on which it is situated, is located in a county other than the one in which the original property is located, the taxpayer may still be eligible for this exemption.
 
Under the original version of the law, enacted by Proposition 60, the replacement dwelling, including the land on which it was situated, had to be located entirely within the same county as the taxpayer's original property. However, Proposition 90 extended the rule of Proposition 60 to other counties.
 
Counties which have adopted a Proposition 90 ordinance:
Alameda, El Dorado, Los Angeles, Orange, San Diego, San Mateo,
Santa Clara, Ventura and Riverside.
 
The replacement property must be equal or less in value than the original property whether the transfer is within the same county or one of the counties that has adopted the proposition 90 ordinance.
 
If the replacement dwelling is purchased or built prior to the sale of the original property, then "equal or lesser value" means the full cash value, or sales price, of the replacement dwelling, cannot exceed the full cash value, sales price, of the original property.
 
If the replacement property is purchased or constructed during the first year after the sale of the original property, then "equal or lesser value" means that the full cash value of the replacement property cannot exceed 105% of the full cash value of the original property. If the transfer occurs during the second year after the sale of the original property, then "equal or lesser value" means that the full cash value of the replacement property cannot exceed 110% of the full cash value of the orginal property.
 
This exemption applies only if the taxpayer decides to take the exemption and has completed the required form from the local county assessor's office. A claim for exemption from reassessment pursuant to Proposition 60/90 must be filed within 3 years of the date the replacement dwelling is purchased or the construction of the dwelling is completed.
 
Sale and Replacement or Modifications of Principal
Residence by Severely and Permanently Disabled Persons
 
The law allows severely and permanently disabled persons to transfer the base-year value of their permanent residence to a replacement dwelling of equal or lesser value. The replacement dwelling can be in the same county or another county that has passed a Proposition 90 ordinance. The time periods for the sale and purchase are the same as discussed for residents 55 years of age or older.
 
A "severely and permanently disabled" person is any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person. This disability will have been diagnosed as permanently affecting the person's ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs.
 
There is also an exemption from reassessment for new construction added to an existing dwelling (remodeling) for severely and permanently disabled persons, if the purpose is to make the dwelling more accessible to the disabled person. Please contact me for a complete understanding of the requirements for claiming this exclusion.
 
Transfers Between Parents and Children and Between
Grandparents and Grandchildren
 
The law provides that if a parent or parents transfer any type of real property to his/her/their children, the transfer does not constitute a change in ownership that would trigger a reassessment of the property for property tax purposes. The same is true for transfers between grandparents and their grandchildren, as well as the reverse direction.
 
This exemption applies to a transfer of a principal residence regardless of value, but only to the first one million dollars of "full cash value", and applies separately to each eligible transferor. For example, a married couple may transfer up to a total of two million dollars in real property. A transfer between siblings is not exempt from property tax reassessment. A claim for exemption must be filed with the local county assessor's office within 3 years of the date of purchase or transfer of real property, but is considered timely if filed within 6 months. Please contact me for a complete understanding of the requirements for claiming this exemption.
 
If your specific question has not been answered here, please give me a call and I'll find the answer for you!
 
 




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