How Inherited Property Taxes Changed in California

Educational overview only. Always consult a qualified tax professional or estate planning attorney regarding your specific situation.

For decades, California homeowners relied on Proposition 13 to keep property taxes low. But when a home is inherited today, Proposition 19 (not Prop 13) determines what happens next next.
Many families are surprised to learn that inheriting a home does not automatically mean inheriting the same low property tax bill. In fact, for many Bay Area families, property taxes can’t increase dramatically after inheritance.
This article explains Prop 19 in clear, homeowner-friendly terms, so you understand what to expect and what questions to ask before making decisions.

The Reality Most Families Don’t Expect
Under Prop 19, most inherited homes in California are reassessed at current market value, which can significantly increase annual property taxes. There is only one narrow path for keeping a parent’s lower property tax base, and it requires the child to move into the home and use it as their primary residence. For families who plan to keep the home as a rental, second home, or long-term investment, a reassessment is often unavoidable.

What Is Proposition 19?
Proposition 19 was approved by California voters in 2020 and went into effect in 2021. It changed how property tax benefits transfer from parents to children.
In simple terms, the law:
- Limits when low property taxes can transfer to heirs
- Encourages inherited homes to be used as primary residences
- Allows reassessment for most other inherited properties
The result is a major shift from how things worked for decades.

How the Rules Changed
Before Prop 19:
- Parents could often pass property to their children while keeping the original Prop 13 tax base, even if the home became a rental or second residence.
After Prop 19:
- Those broad protections are gone.
Today, low property taxes transfer only if specific conditions are met.

When Can Low Property Taxes Transfer?
A child may keep a parent’s property tax base only if all of the following apply:
- The home was the parent’s primary residence
- The child moves into the home and uses it as their primary residence
- Required paperwork is filed on time
- The home’s market value does not exceed the allowed exclusion above the parent’s assessed value
If the home’s value exceeds that exclusion, the excess portion is reassessed, increasing the
property tax bill.

A Simple Example
A parent’s home has an assessed value of $300,000, resulting in property taxes of roughly $3,000 per year. At the time of inheritance, the home’s market value is $1,500,000.
If the child does not move in:
- The home is reassessed, and property taxes may increase to $15,000+ per year.
If the child does move in but the value exceeds the allowed exclusion:
- A portion of the home is reassessed, increasing taxes, sometimes significantly.
For many families, this change alone determines whether keeping the home is financially realistic.

Why This Matters So Much in the Bay Area
In the Bay Area, long-time homeowners often have assessed values far below today’s market prices.
A Prop 19 reassessment can:
- Multiply annual property taxes overnight
- Change the economics of holding inherited property
- Influence whether families sell instead of retain the home
These outcomes often come as a shock, especially for families who assumed Prop 13 protections would continue automatically.

Prop 19 vs. Stepped-Up Basis: Two Different Taxes
This is where confusion is common.
- Stepped-up basis affects capital gains taxes when a home is sold
- Proposition 19 affects property taxes for as long as the home is owned
It is possible (and common) for families to receive a stepped-up basis and still face higher annual property taxes under Prop 19. Understanding both is critical when planning next steps.

Final Thoughts
Proposition 19 has made planning more important than ever for California homeowners. Understanding whether low property taxes can transfer (and under what conditions) can help families:
- Avoid unexpected tax increases
- Make informed decisions about keeping or selling inherited property
- Coordinate estate planning with real estate strategy
Every situation is different, and professional guidance is essential. If you’re navigating an inheritance or planning ahead, I’m always happy to help explain the real estate implications and connect you with trusted local experts.

Quick Answer
Under Proposition 19, most inherited homes in California are reassessed at current market value unless the child moves into the home and uses it as their primary residence. Even then, property taxes may increase depending on the home’s value.