Proposition 58

Proposition 58 is an amendment to the California Constitution approved by voters.  It went into effect November 6, 1986.  It excludes from reassessment transfers of real property between parents and children. Proposition 58 is codified by section 63.1 of the Revenue and Taxation Code.

In California, real property is reassessed at market value if it is sold or transferred which often results in substantially increased property taxes. However, under limited circumstances if the sale or transfer of real property between parents and their children meets certain criteria, the property will not be reassessed.

This proposition allows the new property owners to avoid property tax increases when transferring between parent and child. The new owner’s taxes are calculated on the established Proposition 13 factored base year value, instead of the current market value when the property is acquired.

These parent-child transfers (either direction) may be a gift, an inheritance or a title change such as adding or deleting a name. Qualified properties include principal residences and other real property up to $1,000,000 in assessed value, which may transfer without a reappraisal if the new owner qualifies.

An application for this exclusion must be filed within three years of the transfer date for the exclusion to be retroactive to that date.  If you still own the property, applications may be filed after the three-year period has expired; but the exclusion can only be granted from the year of application forward.

As California faces budget shortfalls, Californians may look toward amending tax exclusions such as this in order to increase state revenues so it is important to remember that, as with other California initiatives, this 25 year old property tax-cutting measure could be repealed at any time via a popular vote.

For more information regarding qualifying for this exclusion contact me directly or visit the Santa Clara County Assessor website.