2% property tax increase limit my ass (transfer, income, live in)

[thrillobyte]

Originally Posted by bad debt

Thankfully that's not how this works at all. First off you can inherit $11.4 million from each parent tax free and then get a step up in basis. So you could literally inherit a $11 million dollar house from your father and then sell it the next day $11 million and pay $0 in taxes. If you choose to hold the property and it appreciates from $11 million to $15 million over the next ten years then there would be capital gains payable on the gain ($4M) upon sale of the asset.

Now, for every dollar above $11.4 million per parent the tax rate is 40% payable when you file the estate tax return. Tax basis would be the amount received by the heir.

This is true but the issue is whether capital gains and inheritance applies only to parent to child or if the benefit can extend to grandparent directly to grandchild. I researched it and couldn't find any stipulation of an 11 million exclusion for a grandchild. The poster didn't say whether they inherited from father, who inherited from granddad. It only said the children got the property from their grandfather. Seems that's the purpose for generations-skipping trusts.


Now let me give an example: I just sold a property my mother owned since the early 70's that she bought for 16K. It sold for $699K. She will owe capital gains and the Medicare tax on the entire sales amount less the 16K base. Amount of taxes: 189K


If the children had lived in the house for two out of the last five years they'd still pay capital gain but they'd get a 250K exclusion. Since they sold it outright they will have to pay capital gain on the entire amount of 1.7 million less the paltry base the grandfather bought it at. Believe me I've researched this from all angles and there's no way to avoid the capital gains tax unless one does a Starker 1031 exchange within 45 days of the sale.

[Ultrarunner]

It was my Godfather that passed away this year and in his will he left his Santa Clare single family home to his two children who sold it this month...

So the property transferred to the his two children when he died and 8 months later the kids sold it.

[settled00]

Originally Posted by mgforshort

Thanks for posting it.

Our property tax went up 11.9 % from 2015 to 2018. When I posted it here on CD some members doubted my numbers. I wonder what is coming now - in fact, I hate to pickup the mail.

with this sort of uncertainty, how are we supposed to plan for our retirement "fixed-income" years???

why do you people keep voting in these idiots??

sorry, I'm cranky tonight after ruining my $400 tire/rim on GAVIN'S potholed crumbling highways who promised my road tax money would fix that. Apparently that money has been shifted to other things...

[SFBayBoomer]

Originally Posted by davidt1

Just got this year's property tax bill. It's a 2.6% increase over last year. Meanwhile, my salary is frozen going forward because my company thinks I make too much for any more increases.

Your salary is irrelevant.

Are you looking at your total tax bill (including special assessments that were voted into law, utility company assessments such as garbage pickup and recycling, vector control, etc.) or just the property tax?

In which county do you live?

[CA4Now]

Originally Posted by settled00

with this sort of uncertainty, how are we supposed to plan for our retirement "fixed-income" years???

why do you people keep voting in these idiots??

Voters, not politicians, passed Prop 13 by a huge margin. And without it, our retirement years would most likely not be spent in any house in California.

[CA4Now]

Originally Posted by SFBayBoomer

Are you looking at your total tax bill (including special assessments that were voted into law, utility company assessments such as garbage pickup and recycling, vector control, etc.) or just the property tax?

Good point. Every year one's total property tax goes up, but the increase is mostly due to all the extra assessments.

[CA4Now]

Originally Posted by thrillobyte

Thank God for Howard Jarvis and Prop 13. My parents bought their house in 1972 and in 1978 their taxes were frozen to $1000. They've paid $1000 every year since then...

Frozen to $1,000? Just in the past five years, our property taxes have increased several hundred dollars.

[bad debt]

Originally Posted by thrillobyte

This is true but the issue is whether capital gains and inheritance applies only to parent to child or if the benefit can extend to grandparent directly to grandchild. I researched it and couldn't find any stipulation of an 11 million exclusion for a grandchild. The poster didn't say whether they inherited from father, who inherited from granddad. It only said the children got the property from their grandfather. Seems that's the purpose for generations-skipping trusts.


Now let me give an example: I just sold a property my mother owned since the early 70's that she bought for 16K. It sold for $699K. She will owe capital gains and the Medicare tax on the entire sales amount less the 16K base. Amount of taxes: 189K


If the children had lived in the house for two out of the last five years they'd still pay capital gain but they'd get a 250K exclusion. Since they sold it outright they will have to pay capital gain on the entire amount of 1.7 million less the paltry base the grandfather bought it at. Believe me I've researched this from all angles and there's no way to avoid the capital gains tax unless one does a Starker 1031 exchange within 45 days of the sale.

If it's from a grandparent then it is subject to the GST (generation skipping tax) which has the same exclusion for the entire estate as from parent to child. You clearly need to be talking to either a CPA or an estate planning attorney if you are confused by this (which you seem to be) so that you can accurately report the necessary documentation to the IRS and pay the correct amount of taxes.

And yes, if it's the same person that bought and sold a primary residence for over $250,000 per person ($500,000 for a married couple) then you pay capital gains unless you do a 1031 exchange. So duh... you do a 1031 exchange, pay $0 in capital gains tax, and then have your children get a step up in basis and the avoid the capital gains tax entirely. The fact you seem to be complaining about this as if it's a bad deal for home owners (and/or real estate investors) means you REALLY need to be talking to professionals if you are in such a situation.

[Csonka]

the Assessor has been pretty fair to me after remodels and a pool

[thrillobyte]

Originally Posted by bad debt

If it's from a grandparent then it is subject to the GST (generation skipping tax) which has the same exclusion for the entire estate as from parent to child. You clearly need to be talking to either a CPA or an estate planning attorney if you are confused by this (which you seem to be) so that you can accurately report the necessary documentation to the IRS and pay the correct amount of taxes.

And yes, if it's the same person that bought and sold a primary residence for over $250,000 per person ($500,000 for a married couple) then you pay capital gains unless you do a 1031 exchange. So duh... you do a 1031 exchange, pay $0 in capital gains tax, and then have your children get a step up in basis and the avoid the capital gains tax entirely. The fact you seem to be complaining about this as if it's a bad deal for home owners (and/or real estate investors) means you REALLY need to be talking to professionals if you are in such a situation.

Well, I think you skipped right over my response re the capital gains tax. Let me repeat it: everyone who sells a house for more than they acquired it for pays a capital gains on the difference. If I live in the house I get the $250K exclusion, but I still pay Fed, AND state capital gains above the $250K and $50K base if I am in California. It was implied that the kids never inhabited the property for 2 of the last 5 years. They might avoid the inheritance tax but they will still have to pay capital gains on the difference between what the grandpa bought it for, let's say $50K, and $1.7 million which presumably they sold it for. So $1,700,000 less $50K is $1,650,000 they'll have to pay the capital gains on unless they do a Starker exchange. 20% of $1,650,000 is $330,000--13.3% of $1,650,000 is $219,450--the 3.8% Medicare tax kicks in after $200K per individual, say $400K exclusion. So 3.8% on $1,250,000 is $47,500. Total taxes the kids owe is $597,000. Unless they try to dodge the taxman and don't file a return. Catch it that time, sport?