Property Tax Planning: Essential Strategies For Real Estate Owners

 At the Law Offices of Berge & Berge in San Jose, we believe that effective property tax planning is a crucial part of estate and tax planning. Our goal is to help you avoid property tax hikes so you can preserve your financial legacy. Led by an attorney with an advanced degree in tax law as well as board certification in estate planning, trust and probate law through the California Board of Legal Specialization, our team can empower you to take a proactive stance on property tax planning.

Strategies To Mitigate Property Tax Increases

In California, changes in property ownership – including sales, gifts and inheritances – can trigger a reassessment of property value, potentially increasing the tax obligations. However, certain transfers are exempt from reassessments, including:

• Interspousal transfers
• Parent-child transfers
• Transfers to a trust
• Transfers of co-tenancies (when one co-tenant dies)
• Transfers to business entities (in some situations)

Our lawyers understand property tax law, and they can help you navigate these rules to avoid unnecessary property tax burdens. They are committed to helping you leverage every available benefit.

Frequently Asked Questions About Property Tax Planning In California

Below, we have answered frequently asked questions about property tax assessments, reassessments, exclusions and the benefits of proactive planning.

How is the assessed value of my property determined in California?

The Golden State assesses the value of your property based on its purchase price at the time of acquisition. This value is then adjusted annually to account for inflation, as mandated by Proposition 13. However, suppose significant improvements are made to the property (for example, adding a new room or renovating the kitchen). In that case, the value of those improvements will be added to the assessed value. In some cases, such as a decline in market value, the assessed value may be temporarily reduced under programs like Proposition 8.

How often is property reassessed in California?

Property in the Golden State is typically reassessed when a change in ownership occurs or when new construction is completed. A change in ownership can include:

• Buying or selling a property
• Transferring a property to a trust
• Adding or removing someone from the title of a property

However, certain transfers such as those between spouses or through a parent-child exclusion, may not trigger a reassessment.

How does the parent-child transfer exclusion work in California property tax law?

The parent-child transfer exclusion allows property to be transferred from parents to children (or sometimes from children to parents). This transfer does not trigger a reassessment of the property’s value for tax purposes. The property must be the primary residence of the parent or child to qualify for this transfer exclusion. Other types of property, such as commercial property, must fall under the $1 million assessed value limit to qualify.

What are the potential tax benefits of proactive property tax planning?

Proactive property tax planning can minimize your tax liability and preserve wealth for future generations. For example, leveraging exclusions like the parent-child transfer or spousal exclusion can prevent costly reassessments. Additionally, understanding assessment appeals processes can help you challenge overvaluations.