Did the County Assessor reassess your real property due to a title change? The consequences of title changes and reassessment of real property are often overlooked and greatly misunderstood. Title changes of real property take place when there is a sale or purchase. A title change can also be triggered by a gift or through a probate inheritance. In other words, the transfer may be voluntary, involuntary, by contract of sale, or simply adding or removing the name of an owner. Keep in mind, a transfer of money from one person to another is not required. Reassessment of real property may still occur, even if there has not been a formal purchase.
Get help Filing a Reassessment Exemption!
Once a county assessor is notified of a title change, Proposition 13 requires the county assessor to reassess the property to its current fair market value. This value is determined as of the date of the change of ownership. Keep in mind, the new market value of the property will increase the real property’s tax rate.
Title changes and reassessment of real property go hand-in-hand with Proposition 13. In 1978, California voters passed Proposition 13, which substantially reduced property tax rates. As a result, the maximum levy cannot be greater than 1% of a property’s assessed value (plus bonded indebtedness and direct assessment taxes). There is a 2% annual increase limit to the assessed value of real property. With this in mind, only four events can cause a reappraisal:
1. A change in ownership (title change);
2. Completed new construction;
3. New construction partially completed on the lien date (January 1); or
4. A decline-in-value (see Market Value Decline – Proposition 8).
Title Changes That Can Avoid Reassessment of Real Property
Alternatively, if the fair market value of real property decreases, the property taxes on that property will decrease. There are exceptions in which title changes may avoid reassessment of real property. For example, the following are exclusions that require a property owner to file a timely claim of exemption with the county’s assessor’s office to avoid reassessment:
1. Transfer of a principal residence between parties and their children.
2. Transfer of up to $1 million of real property between parents and their children.
3. Transfer of principal place of residence between grandparent and grandchildren.
4. The purchase of a replacement property if government action took the original property.
5. Transfers of real property between spouses which include transfers in and out of trusts.
6. Transfers of real estate to an irrevocable trust for the benefit of the creator/grantor or the creator/grantor’s spouse.
There are many other exclusions to the rules to note. Contact your County Recorder to see if your change in title may be exempt from tax reassessment. At A People’s Choice, we can help you complete the document you need to obtain a waiver and avoid a reassessment. We can also help you inform the county recorder that you purchased a home. Contact us today to get started or call 805-648-5540.
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