When one spouse keeps the home in a divorce, an obvious question follows: will the transfer trigger a property tax reassessment? In California the answer is usually no, for a specific reason. This page explains it in plain English. It is general information, and your family-law attorney and tax professional should confirm how it applies to you.
Divorce and Property Tax
Keeping the Home in a Divorce: Property Tax Basics
How California treats a transfer of the family home between spouses for property tax, what to document, and what the exclusion does not cover.
The interspousal exclusion
Most transfers of real property are a change in ownership, which resets the assessed value to market value. California excludes transfers between spouses from that rule (Revenue and Taxation Code section 63). The exclusion applies during marriage and to transfers made as part of a property settlement or a judgment of dissolution or legal separation. In practice, when one spouse receives the other’s share of the home under a settlement, the home usually keeps its existing assessed value.
The state Board of Equalization’s Rule 462.220 explains how changes in ownership are treated and the exclusions that apply.
Long run
Why the assessed value can matter
For a home held a long time, the assessed value can be well below the market value. Here is how far apart the two can drift.
A purchase in an earlier year, seen from today
Zillow typical value for the San Diego metro area. The assessed value is shown at its highest possible path (2% a year, the most Proposition 13 allows; in low-inflation years the allowed increase is smaller, so an actual assessed value would be equal or lower), and never above today’s market value. Taxed at 1.15%. Illustration only.
| Bought in | Typical value then | Assessed value today (at most) | Market value today | Bill on the earlier purchase (at most) | Bill on a purchase today |
|---|---|---|---|---|---|
| 2000 | $247,110 | $413,518 | $930,785 | $4,755 | $10,704 |
| 2005 | $540,636 | $819,423 | $930,785 | $9,423 | $10,704 |
| 2010 | $357,164 | $490,310 | $930,785 | $5,639 | $10,704 |
| 2015 | $495,985 | $616,695 | $930,785 | $7,092 | $10,704 |
| 2020 | $664,059 | $747,839 | $930,785 | $8,600 | $10,704 |
The longer an owner has held a home, the wider the gap between the two bills, which is one reason a home’s listing price and its current tax bill can look so far apart. It is also why the tax on the home you buy will be based on what you pay, not on what the seller pays.
What to document
- The deed that transfers the interest from one spouse to the other.
- The settlement or judgment that supports it. A county may ask for a copy of the marital settlement agreement or judgment.
- A Preliminary Change of Ownership Report (form BOE-502-A), filed with the deed, on which the exclusion is claimed. If the report is missing when the deed is recorded, the recorder may charge an additional fee.
Ask your attorney and the county assessor about timing and the current forms.
What the exclusion does not do
- It applies only to transfers between spouses. A sale or transfer to anyone else, including a family member or a new partner, is generally a change in ownership.
- It does not change the mortgage. The loan is a separate matter: a lender may require a refinance or an assumption. See Rudy’s article on what neutral means for how a real estate agent can help both spouses without taking sides.
- It does not settle other tax questions, such as income tax and capital gains, which are outside this page.
- It does not cover other property. Transfers of other real property are analyzed separately.
The homeowners’ exemption
If the spouse who keeps the home lives there, the homeowners’ exemption, a $7,000 reduction in assessed value for a principal residence, generally stays in place. If you sign over your interest and move out, the county should be told that you no longer claim the exemption on that home, and you can file a new claim for the next home you own and live in. If you are unsure, ask the assessor to confirm what is on file.
Common questions
Does keeping the home always avoid reassessment?
A transfer between spouses is generally excluded. Details depend on documentation and circumstances, so confirm with your attorney and the assessor.
What if we sell instead?
A sale is a change in ownership, and the buyer’s purchase resets the assessed value. Rudy’s article on selling the family home covers that route.
Does this affect what I can borrow?
Lenders look at income, credit and the property. See the neutral overview in the blog, and ask a lender about your case.
Who decides what is fair in the settlement?
That is for the spouses and their attorneys or the court. A real estate agent can provide market information, not legal advice.
Keep exploring
- Blog — Selling during a divorce, timelines and options.
- The divorce real estate guide — A calm, neutral overview.
- Property tax estimator — See a buyer’s bill on a home like yours.
- FAQ — Common questions.
Talk to a lender. Rates, loan programs and approvals come from lenders, not from websites or real estate agents. Talk to your own mortgage broker, or use our preferred lender, Rodrigo Ballon with CrossCountry Mortgage, at 858-735-0255. You are always free to choose any lender you like, and you can verify any lender’s license at nmlsconsumeraccess.org.
Sources
- California State Board of Equalization: Property Tax Rule 462.220, change in ownership
- San Diego County: Preliminary Change of Ownership Report instructions
- San Diego County Assessor: real property assessment
- California State Board of Equalization: homeowners’ exemption
General information for orientation, not legal, tax, financial or appraisal advice. Details change; confirm anything that matters with the official source, your lender and your agent.