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1. Parent to Child Exclusion Claims.
2. Grandparent to Grandchild Exclusion Claims.

Effective January 1, 2009, Sacramento County will charge a $175 processing fee for claims filed untimely. The fee will apply if a claim is filed more than 60 days after the date of the second notice of potential eligibility for exclusion from change in ownership.

Proposition 58, effective November 6, 1986, was a constitutional amendment approved by the voters of California which excludes from reassessment transfers of real property between parents and children. Proposition 58 is codified by section 63.1(b)(1) of the Revenue and Taxation Code.

Proposition 193, effective March 27, 1996, was a constitutional amendment approved by the voters of California which excluded from reassessment transfers of real property from grandparents to grandchildren, providing that all the parents of the grandchildren who qualify as children of the grandparents are deceased as of the date of transfer. Proposition 193 is also codified by section 63.1 of the Revenue and Taxation Code.

A detailed explanation of these exclusions is available at the California State Board of Equalization website.

By applying for these exclusions, property owners may be able to avoid property tax increases when acquiring property from their parents, children or grandparents. In the State of California, real property is reassessed at market value if it is sold or transferred and property taxes can increase dramatically as a result. However, if the sale or transfer is between parents and their children or is from a grandparent to a grandchild, the property will not be reassessed if certain conditions are met and the proper application is filed.

Important Note: Property owners should understand that claiming these exclusions may not always be to their benefit. See the section "When is it not beneficial to claim this exclusion?" for an explanation of that circumstance.

Does the Exclusion Apply to Transfers Between Siblings (Brothers and Sisters)?

No. The exclusion applies only when property is transferred from parent to child or from child to parent, but not when it is transferred between brothers and/or sisters.

Does the Exclusion Apply to Capital Gains or Income Taxes?

No, this exclusion is not related to State or Federal capital gains or inheritance tax laws and has no effect upon them.

• A properly completed, state approved application must be filed with the Assessor as soon as possible following the transfer. An applicant may also be required to provide additional documentation to support their claim. 
  
  
• The application must be filed with the assessor’s office within three (3) years of the date of transfer (which is the date of death if the transfer is the result of a death) in order to qualify for the exclusion retroactive to the date of filing. The application must be filed prior to transferring the property to a third party. 
  
  
• Applications may be filed at any time after the three year deadline; however, those filed after the three (3) year deadline will only become effective for the lien date after the assessment year in which they are filed and will not be retroactive to the date of transfer. 
  
  
• If a notice of supplemental or escape assessment is mailed after the deadline for either of these periods, then the transferee has an additional six months from the date of the notice to file a claim. For example, if a taxpayer received a Notice of Supplemental Assessment for a parent –child transfer dated January 1, 2003, and then received a Notice of Proposed Escape Assessment dated April 1, 2006, the taxpayer would have six months from April 1, 2006 to file a claim with the Assessor.

• Owners may claim the Parent-Child Exclusion on the residence of a parent or child that has been sold or transferred to them. In other words, the exclusion applies whether the transfer is from parent to child, or from child to parent. They may also claim the exclusion on other real property up to $1,000,000 in assessed value, if transferred between a parent and a child. 
  
  
• The exclusion applies to sales and transfers both from parents to their children and from children to their parents. It also applies to transfers between a trust and a parent or child. It does not apply to sales and transfers to and from partnerships, corporations, or other legal entities. 
  
  
• The exclusion only applies to sales and transfers that occurred after November 6, 1986. If a transfer occurs because someone dies, the date of death is considered to be the date the property transferred.
  
  
• A "child" for purposes of Parent –Child Exclusion under Proposition 58 includes:

1. Any child born of the parent(s).
2. Any stepchild while the relationship of stepparent and stepchild exists.
3. Any son-in-law or daughter-in-law of the parent(s).
4. Any adopted child who was adopted before the age of 18.
5. Any foster child of a state-licensed foster parent, if that child was not because of a legal barrier adopted by the foster parent before the child aged out of the foster care system.

Spouses of eligible children are also eligible until divorce or, if terminated by death, until the remarriage of the surviving spouse, stepparent, or parent-in-law.

• This exclusion applies only to transfers occurring on or after March 27, 1996. If a transfer occurs because someone dies, the date of death is considered to be the date the property transferred.
  
  
• This exclusion only applies to transfers from grandparents to grandchildren and not transfers from grandchildren to grandparents (differs from parent/child exclusion in that respect). 
  
  
• To qualify, a grandchild’s own parents must either have both been deceased before the date of transfer from grandparent to grandchild, or, in the case where only the grandparent’s child is deceased, the surviving in-law parent must have either been divorced or remarried before the date of transfer. 
  
  
• A grandchild for purposes of Grandparent-Grandchild Exclusion under Proposition 193 is defined as a "child" of the grandparent’s own children. An eligible "grandchild" for purposes of Proposition 193 is any child whose parent(s) would qualify as a child or children of the grandparents as of the date of transfer.

In some circumstances, claiming the Grandparent to Grandchild or Parent/Child exclusion actually may not be to an owner’s benefit.

Example: If the transferred property was being assessed at its current market value under Proposition 8 at the time of transfer (that is, its market value had fallen below it’s original Proposition 13 factored base year value), it may be beneficial for the new owner not to claim the exemption and instead accept a new Proposition 13 base year reassessment. By doing so in this circumstance, the reassessment can result in lower property taxes over time by locking-in the lower market value as the property’s new base year value as of the date of transfer.

Otherwise, the higher original Proposition 13 base year value set under the parent or grandparent's ownership would some day be reinstated as market conditions improve over time and at a level higher than they would be if the property had received a new Proposition 13 base year value as of the date transferred to the child, parent or grandchild.

In any case, you may wish to consult with a real estate or income tax expert for advice before claiming either of these exclusions.

If you have questions, you may call the Assessor’s Property Transfer Section at (916) 875-0750 between the hours of 9 A.M. to 4 P.M. Monday through Friday.

You can also visit the Assessor’s Office at 3701 Power Inn Road, Suite 3000, Sacramento, CA. 95826-4329, between 8 A.M. and 5 P.M.