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Proposition 19 update – Reassessment Exclusion increased due to inflation

Posted by Maria N. Jonsson | Apr 20, 2023 | 0 Comments

As most Californians know, Proposition 19 which took effect on February 16, 2021, narrowly limits the circumstances when a transfer of real property between parents and children can qualify for a “property tax reassessment exclusion.”

To summarize, under Prop 19, the exclusion is applicable only if the child both (1) moves into the Personal Residence of the parent, and (2) files a Claim for Homeowners' Property Tax Exemption within a year of the “change in ownership.” Prop 19 limited such property tax reassessment exclusion to: the assessed value of the property, plus an addition $1 million.

Inflation has now led to “adjustment” of that $1 million “reassessment exclusion” value.

On February 28, 2023, the Federal Housing Finance Agency announced that the annual change in the House Price Index for California for 2022 was $2.26%.

As a result, the $1 million amount is now adjusted to $1,022,600. This amount will be adjusted again on February 15, 2025.

Accordingly, for transfers (changes in ownership) occurring between February 16, 2023 through February 15, 2025, the property value that will be “excluded” from property tax reassessment is now equal to: the property's assessed value immediately prior to the date of “change in ownership” plus an additional $1,022,600. If the fair market value of the real property at the time of transfer exceeds this “excluded” value, the excess will be reassessed.

At the Law Offices of Maria N. Jonsson, PC, we always urge clients to carefully consider the pros and cons of transferring real property between parents and children and proceed with utmost caution only after a detailed discussion of the consequences of such transfers with their tax professional and attorneys.

Property taxes are only one of the many consequences of property transfers between parents and children. Ownership rights and liabilities, creditor rights, capital gains taxes, gift taxes, and tax filing requirements, etc., are among the many additional factors to consider before signing and recording a transfer Deed. Once a transfer Deed is recorded, a number of negative consequences can no longer be prevented or reversed.

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