Moving a rental into an LLC is one of the most common things clients ask us to do, and one of the easiest ways to lose a Prop 13 base year by accident. The rules are technical, and getting them wrong can trigger a full reassessment that sticks for as long as you own the property.
How California Property Tax Reassessment Works
Revenue and Taxation Code §60 states that a "change of ownership" triggers a property reassessment. If you bought a property in 1995 for $800,000, it might be worth $4,500,000 today. After 30 years of increases capped at 2%, the taxable value might be about $1.5 million, so the bill is roughly $17,000 at a typical 1.1% to 1.2% rate. Reassessed at $4.5 million, the bill jumps to roughly $50,000 to $54,000, an increase of about $33,000 to $37,000 a year. Rates vary by tax rate area, so check your own bill.
The >50% Change-in-Ownership Rule for LLCs
Transfers of interests in an LLC trigger reassessment in two ways. The first is a change in control: one person or entity ends up with more than 50% of the LLC, counting interests they already held. The second applies if you put property into the LLC tax-free under the proportional-interest rule. You then become an "original co-owner," and once more than 50% of the original co-owners' interests have changed hands, added up across all transfers over time, the property you contributed is reassessed.
Key Rules for LLCs:
- A transfer of 50% or less doesn't trigger reassessment by itself. It can if the buyer ends up with control, or if it pushes the cumulative transfers of original co-owner interests over 50%.
- A change in control under R&TC §64(c) reassesses all real property the LLC owns, not just the percentage transferred. Crossing the 50% line under §64(d) reassesses the property that originally came in under the proportional-interest exclusion.
- Keep a running ledger of every interest transferred since the property came into the LLC. Gifts, sales, and some transfers at death all count toward the §64(d) total.
Prop 19 and the Parent-Child Exclusion
Prop 19 took effect in February 2021 and changed how families pass down real estate.
- The parent-child exclusion now covers only a family home that becomes the child's principal residence within one year, plus family farms. Even then, the exclusion is capped. For transfers from February 16, 2025 through February 15, 2027, the value the child keeps is the parent's taxable value plus $1,044,586 of market value. Anything above that gets added to the assessment. The child files Form BOE-19-P and must claim the homeowners' exemption.
- Rentals, vacation homes, and other property that isn't a family home or family farm get reassessed at transfer between parent and child, including property held in an LLC when the transfer causes a change in control or crosses the §64(d) line.
Plan for a future reassessment event if your family holds investment real estate in LLCs.
Safe Harbor Strategies
Transfers That Only Change the Form of Ownership
A transfer that only changes how you hold title, such as moving a property you own outright into a single-member LLC you own 100%, is excluded because your proportional interest doesn't change. That's the rule in the next section, not a separate exception.
The Proportional-Interest Exclusion, R&TC §62(a)(2)
Transfers between you and an entity do not trigger reassessment if your proportionate interest remains identical. The catch is that using this exclusion makes you an original co-owner under §64(d), so later transfers of your LLC interest are tracked.
Filing Form BOE-100-B
When an LLC has a change in control or a change in ownership under these rules, the LLC or the person acquiring control must file Form BOE-100-B with the State Board of Equalization within 90 days. Missing the filing brings a penalty of 10% of the tax on the new value, on top of the reassessment. The BOE may also send the form on its own request, with its own deadline.
Thinking about moving property into or out of an LLC? Talk to us before you sign the deed. Call 323-463-2600 or book a call.