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We have written extensively on the impacts of proposition 19, effectively a “death tax” on inherited real estate. (see our detailed additional information on Prop 19, link here).
In short summary, one of the new “tests” to qualify for an intergenerational exclusion under Proposition 19 is a “cap” of $1,000,000 based on the fair market value of the property at the time of the transfer (via gift, inheritance, purchase or other method), plus the sum of the property’s factored base year value. (See our article here on how to figure your new basis.)
That $1 million cap is to be adjusted every other year, beginning in February 2023. The section that requires the State Board of Equalization (BOE) to calculate and publish the adjustments and reads as follows:
“Beginning on February 16, 2023, and every other February 16 thereafter, the State Board of Equalization shall adjust the one million dollar ($1,000,000) amount described in paragraph (1) for inflation to reflect the percentage change in the House Price Index for California for the prior calendar year, as determined by the Federal Housing Finance Agency.”
Per the BOE, on February 28, 2023, the Federal Housing Finance Agency (FHFA) announced that the annual percentage change in the House Price Index1 for California for 2022 was 2.26 percent.
Anyone who follows real estate may strongly disagree that prices have only risen 2.26 percent in the past two years.
Nevertheless, as such, the BOE has adjusted the $1 million amount to $1,022,600.
Consequently, for transfers that occur February 16, 2023 through February 15, 2025, the value cap will be the sum of the property’s factored base year value plus $1,022,600. The next adjustment of the $1 million amount will occur in February 2025.
Here is the BOE’s new guidance chart on the matter:
Date of Transfer or Change in Ownership Applicable $1 Million Amount
February 16, 2021 – February 15, 2023 = $1,000,000
February 16, 2023 – February 15, 2025 = $1,022,600
– Devin Lucas
Author Devin R. Lucas is a Real Estate Attorney, Broker and REALTOR®, specializing in Newport Beach, Costa Mesa and Orange County coastal communities, serving individual and investors in residential real estate.
Lucas Real Estate – Attorney Devin Lucas and CPA Courtney Lucas – are experts in California intra family transfers using all aspects of Propositions 13, 58, 193, 60, 90 and new Proposition 19. Learn more about how Lucas Real Estate may help your family transfer by clicking here.
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California Board of Equalization: https://www.boe.ca.gov/prop19/
California Board of Equalization letter to county assessors dated March 7, 2023, available here: https://www.boe.ca.gov/proptaxes/pdf/lta23012.pdf
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