I just posted an article about how under California Proposition 58 if you inherit a property from your parents (or grandparents under certain conditions) and decide to keep it and make it a rental or decide to live in it, then you may keep your parents old low property taxes. However, if California Senator Jerry Hill has his way, this will all change with the passage of the Senate Constitutional Amendment 3 (SCA-3). For it to become law, it will require a two-thirds majority vote by both houses of the state Legislature, then it would go on the ballot in 2020. So it’s not as simple as the CA legislature voting on it.
Prop 58 has really favored those inheriting property, even rentals in California.
EXISTING RULE: Real property excluded from reassessment by Propositions 58:
- Transfers of primary residences (no value limit)
- Transfers of the first $1 million of real property other than the primary residences. The $1 million exclusion applies separately to each eligible transferor.
- Transfers may be result of a sale, gift, or inheritance. A transfer via a trust also qualifies for this exclusion. For property tax purposes, we look through the trust to the present beneficial owner. When the present beneficial ownership passes from a parent to a child, this is a change in ownership that is eligible for the parent-child exclusion.
PROPOSED NEW RULE
Individuals who inherit property from their parents or grandparents and want to also inherit the assessed value of the property must make that home their primary residence within 12 months of inheriting it. Thus the proposed change will not burden those wishing to keep and live in the family home. However, if the heirs decide to rent out the home, then the property would be reassessed to market rate and the property taxes would be adjusted accordingly. This could easily turn a $5,000 property tax bill into $25,000 in the Bay Area. The proposed change will of course raise revenue for the State.
This change may discourage heirs from keeping the family home as a rental and just sell it.
Link to the story: Proposed Bill