Expanded property tax break rules to eligible homeowners - Read Part 1 blog post here.
Taxation of inherited property transfers
II. TAXATION OF INHERITED PROPERTY TRANSFERS
What has changed?
Inherited homes that are not used as principal residences, such as second homes or rentals, are now required to be reassessed at market value when transferred.
The taxable value can be transferred:
To only those properties used as a primary home or farm by the child or grandchild.
If homeowners’ exemption if filed within one year of transfer.
If the value of the property is less than $1M over the original tax basis.
If the property value, at the time of transfer, is more than $1M over the original tax basis, some upward adjustment in assessed value would occur.
How does this affect a homeowner who has inherited a property from their parents or grandparents?
Prop 19 eliminated the parent-to-child and grandparent-to-grandchild exemption in cases where the child or grandchild does not use the inherited property as their principal residence but instead uses the property as a rental house or a second home.
When the inherited property is used as the recipient's principal residence but is sold for $1 million more than the property's taxable value, an upward adjustment in assessed value would occur.
If the property is more than $1M over the original tax basis, what is the new taxable basis?
The new taxable basis will be the assessed value of the property at time of transfer minus $1M.
Where may a claim to transfer a tax basis be made?
Visit San Diego County Property Tax Services for more information.
If you are looking to downsize or upsize, don’t let taxes trap you in a home that no longer works for you! You may be able to transfer those low property taxes to your new home.
Sue, Gina and The De Legge Team are not attorneys or tax advisors and the information contained in this article should not be considered tax or legal advice. Whether you are buying or selling a property and have legal or tax questions, we encourage you to consult your legal and tax advisors.
Want to learn more? Visit Prop19