If you transfer ownership to your kids by February 15th through a grantor trust or irrevocable trust, then they won’t be impacted when the new rule takes effect. Ask about your IRS step-up in basis though.
The county recorder’s office is closed on February 15th.
The county recorder’s office is closed for over-the-counter work due to the pandemic.
If you notarize your document by February 15th, they will accept it as long as you record it at the county recorder’s office within three years.
Call his cell phone during normal hours (his wife is a divorce attorney).
Prop. 19 will reduce or eliminate some generous tax breaks that families get when property is transferred between parents and children. But it won’t change the rules for trusts themselves.
Some transfers are exempt from reassessment. Transfers between spouses are always exempt.
Another exclusion applies to transfers between parents and children, and between grandparents and grandchildren if the parents are not alive. For simplicity, we’ll assume here the transfer is from parents to children, but it also works in reverse.
Under current law, parents can transfer — by sale, gift or inheritance — their primary residence to their children and it won’t be reassessed, no matter how much it’s worth or how the kids use it.
In addition to a primary home, each parent can transfer “other property” — such as a vacation home, rental or commercial property — and exempt up to $1 million in assessed value (not market value).
Prop. 19 changes these rules on parent transfers that take place after Feb. 15 in the following ways:
It abolishes the exemption on “other property.”
It preserves the exemption on primary residences, but only if the child also uses the home as a primary residence and to the extent the difference between the home’s assessed value and market value does not exceed $1 million (indexed for inflation)
If it does exceed $1 million, it will be partially reassessed, but not to full market value. If the child does not use the home as a primary residence, it will be reassessed at market value.
Prop. 19 is not retroactive and won’t apply to any property until it is transferred (or deemed transferred) after Feb. 15.
Now, older homeowners (55+) can take their old property-tax basis with them when they buy a more expensive home anywhere in the state — up to three times. Homeowners with disabilities will be able to do the same, plus victims of wildfires and other natural disasters and hazardous waste contamination will be able to do so after their home is damaged.
The number of times that a tax assessment can be transferred increased from one to three for persons over 55 years old or with severe disabilities (disaster and contamination victims would continue to be allowed one transfer).
If they pay equal or less in price, the property-tax basis from their previous home transfers.
If they buy up in price, the difference between sales price of old home and purchase price of new home is added to the tax basis (pay full tax on the difference).
New residence must be purchased within two years of the sale of the previous residence.
The measure goes into effect on April 1, 2021.
In California, parents or grandparents could transfer primary residential properties to their children (or grandchildren if all parents are deceased) without the property’s tax assessment resetting to market value. Other types of properties, such as vacation homes and business properties, could also be transferred from parent to child or grandparent to grandchild with the first $1 million exempt from re-assessment when transferred. The ballot measure eliminates 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, such as using a 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. The ballot measure also applied these rules to certain farms. Beginning on February 16, 2023, the $1 million amount would be adjusted each year at a rate equal to the change in the California House Price Index.
Real estate interests raised more than $39 million to support Proposition 19’s passage. Realtors are expected to benefit from increased home sales, both by older homeowners deciding to take advantage of their new tax benefits to move and heirs preferring to sell their parents’ properties rather than pay higher property taxes.
Much of the Realtor-backed campaign for Proposition 19 focused on benefits to wildfire victims and increased funding for wildfire response. But disaster-affected homeowners constitute well under 1% of those eligible for tax relief under Proposition 19, according to an analysis by the California Budget and Policy Center, which found the benefits mostly accruing to older white homeowners.
And while the measure does reserve new tax revenue for wildfire response, the state’s nonpartisan Legislative Analyst’s Office believes that the vast majority of the wildfire funding will not start flowing until 2025 at the earliest.
The Proposition 13 Tax Transfer Initiative will be on the ballot in November. If passed, it will give those 55 and older the ability to take their old property-tax basis with them, no matter (a) the new home’s market value; (b) the new home’s location in the state; or (c) the buyer’s number of moves. But the tax basis will be subject to a re-calculation, depending if the new home is more or less expensive.
The California Association of Realtors is also pursuing a legislative alternative that will eliminate intergenerational transfers of primary residences and other inherited property being used for income-producing purposes without reassessment.
The kids and grandkids have enjoyed taking over their elders’ homes – and their typically ultra-low tax basis that transferred. The state legislature could change that in August, which would bring in additional revenue to compensate for those seniors taking their old tax basis with them.
Daytrip sent in this article (link below) on baby boomer sales, and how the transfer of homes from parents to children are likely to dampen the supply of homes for sale – and somewhat limit the property-tax receipts:
They do expect more boomer sales – it looks like a growing trend as more boomers get into their mid-70s:
Home Sales Likely to Pick Up as Homeowners Get Older. Although the aging of California’s homeowners has depressed home sales in past years, this pattern is likely to reverse in the future.
As California’s homeowners continue to age—transitioning from the 55 to 75 age group to the over 75 age group—more and more will begin to downsize, move into assisted living or with family, or die. When this occurs, home sales are likely to rise.
Between 2003 and 2013, over two-thirds of homes in California with owners 75 or older were sold to a new owner, compared to less than one-third of homes with owners ages 55 to 75.
Different Rules Apply to Homes Passed From Parents to Children. In general, when a home is transferred to a new owner, its taxable value is reset to its purchase price.
California voters, however, passed Proposition 58 in 1986, which amended the California Constitution to exempt transfers between parents and children (and later grandparents and grandchildren under certain circumstances under Proposition 193 ) from revaluation. This allows a child to inherit their parent’s lower taxable property value.
The report shows the parent-to-child transfers to be around 10% over the total homes sales over the last decade, but it should be going higher, especially in the higher-cost coastal counties!
Parent-to-Child Exclusions Have Had a Notable Impact on Revenues. Over the past decade, around 10 percent of property transfers have taken advantage of the parent-to-child exclusion to prevent an increase in property tax payments. Figure 6 shows how many of these exclusions have been used each year during the past decade.
San Diego County is the second most populated county in the state, so no surprise we’re #2 on list at $133,000,000 in estimated reduced taxes. Those are a substantial number of homes being transferred within the family!
If the average tax savings was $10,000 per house sold, it would mean 13,300 homes transferred from parent to child – and this is from 2014-2015. We had 35,382 homes sold on the MLS in the same period. Add the FSBOs and new-home sales and we might have had 40,000 to 45,000 total homes transferred in fiscal 2014-2015.
The parent-to-child transfers could be as many as 25% of the homes moved! (40,000+13,300 = 53,300. 13,300/53,300 = 25%)
Their $133,000,000 estimate could be a tad off, but we probably have 10% to 20% of the potential supply of homes for sale being transferred within the family. No wonder the public supply is so limited.
It is a trend that probably started to increase in 2013 as prices took off. Parents realized that with the low tax basis, a child would be better off moving into the family homestead, rather than buying a resale home and paying full boat on the property taxes!
Once home values started declining, the San Diego County tax assessor started revising downward the assessed values of properties bought during the peak era.
Many were a results of requests made by homeowners, but the assessor’s staff also revised some voluntarily. Now that it appears that the market has bottomed, are the tax-assessed values being raised?
A generous reader offered the following:
The properties that were not re-assessed downward under (the other) Prop 8 continue to creep up every year by either 2% or California CPI, whichever is lower. That’s basically every home bought prior to the bubble, and they only got a break when CCPI was negative for the first time since Prop 13 and every property got a shave.
Those that were adjusted downward under Prop 8 are re-evaluated every year and can jump up to whatever the tax assessor says they are worth until they get restored to their original assessed value plus annual increase (which they also track). When those properties get back to where they would have otherwise been but for the recession, then they increase annually like all other properties.
The Assessor says they are cautiously restoring AV on those that his office reset because they don’t want to fight appeals and in many areas they just don’t have sufficient volume of comps to justify higher AV yet.
Glad to hear that the tax assessor is ‘cautiously restoring’.
Those without online access can call (858) 505-6262 and have a form mailed, but they need to act quickly, Dronenberg said.
He said the form is self-explanatory and does not require legal knowledge.
More than 200,000 taxpayers were granted a reduction in assessed value last year, he said. They do not need to re-apply because their property value will be reviewed automatically. Property owners who disagree with their reassessment are allowed to file an appeal.
The deadline gives county staff time to conduct the review before the 2012-13 property tax bills are mailed out.
(You are required to include recent comparable sales – I’m happy to help!)
Hat tip to ProfHoff for sending in this update fromsfgate.com:
Many California homeowners may be surprised to learn that some charges on their property tax bills are not deductible on their income tax return.
The Franchise Tax Board is on a mission to get California homeowners to follow the law and stop deducting the entire amount of their property tax payment. Increasing compliance would raise money for the state and federal government.
(Reminder: California homeowners must pay the first half of their 2011-12 property tax payment by Dec. 10 to avoid penalties.)
Tax pros say the vast majority of homeowners deduct their entire property tax payment as an itemized deduction on their federal tax return, even though federal law prohibits deducting certain taxes and fees. Taking the full deduction reduces state as well as federal taxes.
To be deductible, a property tax must be a percentage of the home’s assessed value (known as an ad valorem tax). It also must be imposed uniformly throughout the community and benefit the general community or government.
Any tax that is a flat fee per household or an itemized charge for services assessed against specific property or certain people is not deductible. Nondeductible charges might be identified as Mello-Roos or Community Facilities Districts, 1915 assessment district bonds, lighting and landscape, parcel taxes, school or college measures and bonds, water, sewer, flood, police, fire and libraries, the tax board says on its website.
Property tax bills do not break out which charges are and are not deductible. In many cases, it’s hard to even decipher what the charges are.
Nevertheless, the tax board told tax preparers in September that it was going to add three lines to 2011 California income tax returns asking homeowners for their parcel number, the amount of property taxes paid and the nondeductible amount.
After getting many complaints from the tax community, the board decided in mid-November to postpone these changes until 2012 tax returns and in the meantime try to educate homeowners about the issue.
SACRAMENTO, Calif. — Democratic lawmakers are determined to close tax loopholes they say cost state and local governments hundreds of millions of dollars each year, as they search for ways to trim California’s enormous deficit.
A report by the union-funded California Tax Reform Association found that the share of property tax paid on residential property has increased since two-thirds of voters approved California’s landmark Proposition 13 tax law in 1978, while the share paid on commercial property has decreased.
In Contra Costa County, for example, taxes on residential properties now make up 73 percent of property taxes collected, up from 48 percent in 1978.
Democrats and unions say many corporations are using loopholes when they buy and sell properties to avoid having them reassessed and their property taxes go up.
“The system is an incredible mess,” said the association’s executive director, Lenny Goldberg. “People are constantly changing their share of ownerships, figuring out ways to avoid reassessment.”
Republicans strongly oppose efforts to tinker with the system. They see such moves as an effort to undermine Proposition 13, the initiative that capped property tax increases and remains popular with voters.
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!