Of Counsel
California’s Proposition 19 changed the rules for transferring real estate between parents and children. While some family home transfers can still avoid full property tax reassessment, rental properties, vacation homes, and many inherited homes no longer receive the same tax treatment that existed before 2021. If you’re planning to gift real estate to your children, understanding these rules before making a transfer can help you avoid unexpected tax consequences.
How Does Proposition 19 Work in Plain English?
Before Proposition 19, parents could generally transfer a primary residence and certain other real estate to their children without triggering property tax reassessment.
Today, the rules are much narrower.
A parent-child transfer generally avoids reassessment only if:
- The transferred property was the parent’s primary residence.
- The child makes the property their own primary residence.
- The property’s value falls within Proposition 19’s exclusion limits.
Most rental properties, vacation homes, and investment properties are now reassessed to current market value when transferred to children.
What Changed Under Proposition 19?
Proposition 19 took effect on February 16, 2021, replacing much of the property tax protection previously available under Proposition 58.
The law still allows qualifying parent-child transfers of a principal residence, but only if specific requirements are met. Even then, the exclusion is limited.
The additional exclusion amount is no longer a flat $1 million. It is adjusted every two years for inflation. For transfers occurring between February 16, 2025, and February 15, 2027, the exclusion amount is $1,044,586.
Before and After Proposition 19
| Situation | Before Prop 19 | After Prop 19 |
| Parent’s primary residence transferred to child | Generally no reassessment | No reassessment only if the child makes it their primary residence and the property’s value falls within the allowable exclusion |
| Rental property | Up to $1 million of factored base year value could qualify for exclusion | Fully reassessed at current market value |
| Vacation home | Could qualify for exclusion | Fully reassessed |
| Family home worth substantially more than the exclusion amount | No value limit | Partial reassessment applies once the property’s market value exceeds the parent’s taxable value plus the inflation-adjusted exclusion amount |
Can a Parent Give a House to Their Child?
Yes. Parents can legally gift a house to their child during life or transfer it through an estate plan.
However, transferring ownership does not automatically preserve the existing property tax assessment. Proposition 19 determines whether the transfer qualifies for an exclusion from reassessment. Federal gift tax rules are separate from California property tax rules, meaning a transfer may have different tax consequences under each system.
For federal gift and estate tax purposes, the lifetime basic exclusion is $15 million per individual in 2026, with annual inflation adjustments.
What Happens When You Gift Rental Property to Children?
Rental property is one of the areas most affected by Proposition 19.
Unlike a qualifying primary residence, a rental property transferred from parent to child generally does not qualify for the parent-child exclusion. Instead, it is reassessed at its current fair market value, often resulting in significantly higher annual property taxes.
For families hoping to preserve rental properties as long-term investments or sources of rental income, this change has become one of the biggest estate planning challenges created by Proposition 19.
How Can You Reduce the Risk of Property Tax Reassessment?
There is no universal method for avoiding reassessment after Proposition 19, and many commonly suggested strategies do not automatically preserve a property’s tax basis.
Depending on your circumstances, planning may involve:
- Revocable or irrevocable trusts as part of a broader estate plan
- Partial-interest transfers, when appropriate
- Business entities such as LLCs, although transfers involving LLCs can themselves trigger reassessment under California’s change-in-ownership rules
- Careful planning around the principal residence exception, including satisfying occupancy and filing requirements
Because these strategies involve both California property tax law and estate planning considerations, they should be evaluated before any transfer occurs.
Is Proposition 19 Going to Be Repealed?
There have been several efforts to repeal or modify Proposition 19, including recent ballot initiative campaigns seeking to restore the former parent-child transfer exclusions. Although these efforts have generated significant public discussion, Proposition 19 remains in effect as of 2026. Families should plan based on the current law unless and until California voters or the Legislature adopt changes.
Protect Your Family’s Long-Term Planning
Property transfers that once seemed straightforward now require much more careful planning. Whether you’re considering gifting a family home, transferring rental property, or developing an estate plan for future generations, the timing and structure of the transfer can significantly affect future property taxes.
At Schneiders & Associates, LLP, we help California families evaluate their options before transferring real estate so they can make informed decisions that align with their long-term estate planning goals. Contact us to discuss your family’s situation and build a strategy tailored to your objectives.