This month I want to visit with you about a way keep a home “All in the Family” and save taxes doing it.
They’re called the Parent-to-Child or Grandparent-to-Grandchild Exclusions or by their constitutional names, Prop. 58 and Prop. 193, respectively.
In general, Prop. 58 states that real property (residential home) transfers, from parent to child or child to parent, may be excluded from reassessment. Prop. 193 expands this tax relief to include transfers from grandparents to grandchildren. This means the home’s tax-base remains the same as it was when the parents or grandparents purchased it, which could be a tremendous savings on property taxes.
In both cases, a claim must be filed within three years of the date of transfer to receive the full benefit of the exclusion. In addition to tax relief on the principal residence, you may claim an exclusion on transfers of other homes with an assessed value of up to $1 million. The $1 million exclusion applies separately to each eligible person. A $2 million limit applies to community real property of an eligible married couple.
Here’s how it works.
The home has to be owned by the parent or the child. The child may be a son, daughter, son-in-law, daughter-in-law, stepchild or a child adopted before 18-years-old. Spouses of eligible children also are eligible until divorce or if they die, until the remarriage of the surviving spouse, stepparent or parent-in-law.
Now it’s important to remember that government is run by forms – a little Assessor humor here – and this exclusion is no different. You must complete what is called “Claim for Reassessment Exclusion for Transfer between Parent and Child” for a gift or purchase of the home between parent and child. These forms can be obtained online at assessor.lacounty.gov.
Now, Prop. 193 is a little different but does follow a similar process.
The home must be owned by the eligible grandparent. The grandchildren must be the children of the parents, who are deceased. The parents must be the children of the eligible grandparents as of the date of transfer and, as stated, the child must be of the deceased parent. Again as forms go, this one is called the “Claim for Reassessment Exclusion for Transfer from Grandparent to Grandchild” and it must be completed and filed with the Assessor’s Office. This is done whether the transfer is a gift or a purchase of the home from grandparent to grandchild.
Let’s look at some frequently asked questions:
Q. I recently inherited the family home, but I don’t really want to live there. Do I have to make it my principal residence to qualify for the Prop. 58?
Q. My parents just gave me their house that sits on 10 acres of land. Isn’t there a limit for excluding the principal residence from reassessment?
A. Yes. Ten acres exceeds the amount of land necessary for a home site.
Q. I’m thinking of giving several properties to my children. Can I decide which child gets the exclusion?
A. The person who files first will get the exclusion.
This is just one of the savings program offered by my office. For additional property tax relief programs, visit assessor.lacounty.gov/exclusions-tax-relief or call 213/974-3211. Please remember these programs are designed to save you money. I encourage you to avail yourself of these.
Los Angeles County Assessor Jeff Prang has been in office since 2014. Upon taking office, Prang implemented sweeping reforms to ensure that the strictest ethical guidelines rooted in fairness, accuracy and integrity would be adhered to in his office, which is the largest office of its kind in the nation with 1,400 employees and provides the foundation for a property tax system that generates $17 billion annually.