Tax Cuts and Jobs Act Part III: Preserving a Property Tax Exemption

Some of us are still grappling with the new tax act and its ramifications (hello tax preparers!). There has been a lot of confusion; some of this stemmed from the passage of the Tax Act so late in the year and just having so many versions of the bill in the news. It was hard to be clear about what finally made it into the Act and what was jettisoned at the last minute.

Of course, for Californians, the $10,000 limit on state and local taxes has been a bitter pill to swallow. Many homeowners in CA pay high property taxes and CA state income tax is quite high. For California homeowners it is easy to reach the new limit.

From an estate planning perspective, it is more important than ever to consider property tax reassessment questions if you are leaving real property in California to beneficiaries who are eligible for the exclusion from reassessment. This is a relevant question only if they plan to keep the property-either to live in themselves or rent it out. It may be possible to structure your trust to preserve the exclusion from reassessment.

2018 is well underway with Chinese New Year’s, Easter and Passover already past. Not to mention St. Patrick’s Day! This was a HUGE holiday when I lived near Philadelphia. I remember everyone basically took the day off and headed to the streets. If you had a resolution to review or update your estate plan in 2018 (or just get one period) this is a good time to do it. Taxes are done-or nearly-and you have all your records handy.

As always, talk to your tax preparer if you have questions and need to adjust your tax planning. Talk to me if you are considering leaving California real property to a beneficiary.