How To Preserve Your Property Tax Basis in San Diego County
Today I want to analyze how to preserve the tax basis on a property that has been family owned for a long time, and will be transferred from parent to child, or even from grandparent to grandchild. I am specifically discussing land in San Diego County. We are getting ready to build a new project right now and we successfully preserved this basis for this project. This has been in the works for a couple years.
Low Property Tax Basis
The family’s grandmother took ownership of this property around the 1950s or so. The tax basis has been sitting around $19,000 on the land. The structure and improvements averaged about $50,000, which is very low. This is a three acre property with a house on it in Ramona, so this is a very low tax basis that can be preserved
Inherited Property Transfer
When the transfer occurs, either from the grandparent to grandchild, or parent to child, you will file a Parent/Child and Grandparent/Grandchild Exclusion Form with the San Diego County Assessor. This document must be accepted by them. Once the Assessor accepts the document, it preserves that tax basis. The basis can only rise, I believe, 2% every year based on the laws that are in place in California. So that’s going to stay low for a long period of time.
Land vs Improvements Costs
There are two separate pieces to this process. The land is assessed at a certain value, which is the $19,000 we reviewed, and the improvements is the other piece, which is around $50,000. The tax basis on the improvements cannot be preserved when new improvements are added, which we plan to do, but the land tax basis will remain. The $19,000 basis that was transferred on the land will stay in place, which is great because the owners will only pay property taxes on that amount for a long time at that rate as long as they live at that property.
The improvements we make will get reassessed at the actual construction cost that it takes to build the new house and renovate the existing home into an ADU conversion. They plan to live on this property for a long time, so the land preservation will definitely benefit them in the long run. This transfer used to just be a parent/child transfer, but San Diego County added the grandparent/grandchild transfer this year in 2021.
Timeframe for Property Transfers in San Diego County
I hope this helps. If you plan to transfer, make sure you file that exclusion. Keep in mind that it’s taking about six months to get this done right now. The county is very slow. Allow yourself plenty of time before beginning any development planning on the property so that the exclusion is taken care of.
Take a look at our comprehensive collection of similar videos on our YouTube channel, The Real Property Show. Thank you and have a great rest of your day.
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