How the parent and child exclusion works now, what it costs when the home is worth more than the cap, and the deadlines that decide whether it applies at all
For more than thirty years, California parents could leave their home to their children without a property tax reassessment, whatever the home was worth. They could also pass up to $1 million of assessed value in other real property, such as a rental or a vacation house, on the same terms. Proposition 19, approved by voters in November 2020, ended both rules. The exclusion for other real property is gone. What remains is a narrower exclusion for a family home or a family farm, and that exclusion is capped.
The rules are in Revenue and Taxation Code section 63.2, which governs purchases and transfers on and after February 16, 2021. When a parent dies, the date of death is the date of transfer. The rules in effect on the date of death govern, even if the trustee records the deed months later.
Who qualifies
The exclusion applies to transfers between parents and their children. The statute defines children broadly. It includes stepchildren while the stepparent relationship continues, sons-in-law and daughters-in-law, children adopted before age 18, and certain foster children.
A transfer from a grandparent to a grandchild qualifies only if every parent of that grandchild who is a child of the grandparent has died. Transfers between siblings, and from an aunt or uncle to a niece or nephew, receive no exclusion. Those properties are reassessed to full market value.
The family home requirement
The property must have been the parent’s principal residence, which the statute defines as a dwelling eligible for the homeowners’ or disabled veterans’ exemption because the parent owned and lived in it. It must then become the child’s principal residence within one year of the transfer, and the child must file for the homeowners’ or disabled veterans’ exemption within that year.
The exclusion lasts only as long as the home remains the principal residence of an eligible child. If that child moves out and no other eligible child moves in and files within a year, the assessor enrolls the value the property would have carried without the exclusion, beginning with the next lien date.
A family farm is treated differently. A farm need not contain a home that the child occupies, and each legal parcel that makes up the farm is tested on its own.
The value cap
The exclusion protects the parent’s taxable value, meaning the original base year value with its annual inflation adjustments, plus an allowance. The allowance began at $1,000,000 and is adjusted every two years by the State Board of Equalization. It was $1,022,600 for transfers from February 16, 2023 through February 15, 2025, and it is $1,044,586 for transfers from February 16, 2025 through February 15, 2027, as announced in Letter To Assessors No. 2025/009.
If the home’s market value on the date of transfer is less than the parent’s taxable value plus the allowance, the child keeps the parent’s taxable value. If the market value is higher, the difference is added to the parent’s taxable value. The Board’s own example in Publication 801, using the original $1,000,000 allowance, is a home with a taxable value of $300,000 and a market value of $1,500,000. The limit is $1,300,000. The $200,000 above the limit is added, and the child’s new taxable value is $500,000 rather than $1,500,000.
In coastal San Diego County, the cap often applies. A home bought in the 1980s may carry a taxable value of a few hundred thousand dollars and a market value of two or three million. In those cases the child keeps the parent’s taxable value, but the market value above the limit is added to it. The calculator below runs the same arithmetic as the statute.
Proposition 19 parent and child exclusion calculator
Enter the figures as of the date of transfer. For a transfer at death, that is the date of death. The taxable value is the assessed value of land and improvements shown on the property tax bill, before exemptions, and can also be obtained from the county assessor.
The calculator applies Revenue and Taxation Code section 63.2(d) and the allowance amounts published by the State Board of Equalization. It does not account for supplemental assessments, exemptions, special assessments or the annual inflation adjustment of up to 2 percent. Actual rates vary by tax rate area; 1.10 percent is an illustration only. The result is an estimate and is not legal or tax advice.
Filing deadlines
Two filings are required, each with its own deadline.
The claim for the exclusion is filed with the county assessor on form BOE-19-P for a parent and child transfer or BOE-19-G for a grandparent and grandchild transfer. It must be filed within three years of the transfer and before the property is transferred to a third party. A claim is also timely if it is filed within six months after the assessor mails a supplemental or escape assessment notice for the transfer. A late claim is still accepted while the child owns the property, but relief begins only with the year the claim is filed.
The homeowners’ exemption claim must be filed within one year of the transfer. If it is filed later, the exclusion begins in the year the exemption claim is filed rather than on the date of transfer. In a trust administration that year runs from the date of death, and it often passes before the family has decided who will live in the house. We raise the question at the first meeting for that reason.
Case study: two children and one house
A widowed mother died in 2025 and left her home in a North County coastal community to her son and daughter in equal shares through her revocable trust. The home had a taxable value of about $410,000 and a market value of about $2,100,000. The daughter wanted to live there. The son lived out of state and wanted his share in cash.
With the daughter moving in and filing her exemption claim on time, the limit was $1,454,586, the taxable value plus the allowance then in effect. The $645,414 above the limit was added, and the new taxable value became $1,055,414 rather than $2,100,000. At a combined rate of about 1.1 percent, that is roughly $11,500 a year in property tax the daughter does not pay, for as long as she owns and occupies the house.
How the son was paid out mattered as much as the claim. Had the trustee deeded the house to both children and the daughter then bought her brother’s half, the purchase would have been a transfer between siblings, and that half would have been reassessed. The trust instead gave the trustee authority to make non pro rata distributions. The trustee allocated the house to the daughter and equalized the son’s share with other trust assets and a loan taken at the trust level. Structured that way, the house can be treated as passing from mother to daughter, subject to the trust’s terms and the assessor’s review.
Property that does not qualify
Rental property, vacation homes, commercial buildings and a parent’s home that no child will live in are reassessed when they pass to children. For families with those holdings, the planning question changes from how to use the exclusion to how, when and in what form the property should pass. The options include lifetime sales, ownership through entities, and in some cases accepting the reassessment and planning for the cash flow. Entities carry their own change in ownership rules, which we will cover in a separate article.
Parents themselves have a separate benefit under Proposition 19. A homeowner who is 55 or older, or severely and permanently disabled, may carry the taxable value of a principal residence to a replacement residence anywhere in California up to three times, with an adjustment if the replacement costs more. That rule is in Revenue and Taxation Code section 69.6.
How we can help
Tomer T. Gutman advises parents on how their homes and other real property should pass to their children, and advises trustees and families on the Proposition 19 claims that follow a death. We review the trust’s distribution provisions, identify which properties qualify, prepare the assessor filings, and coordinate the income tax side, including basis and any sale, with the family’s CPA.
This article is general information about California and federal law as of its date. It is not legal or tax advice and does not create an attorney-client relationship. Case studies are composites drawn from the kinds of matters the firm handles; names, places, amounts and other details have been changed, and the result in any matter depends on its own facts. Tax results should be confirmed with your CPA. Responsible attorney: Tomer T. Gutman, Worden Williams LLP, 462 Stevens Avenue, Suite 100, Solana Beach, California 92075, (858) 755-6604.
