Property Tax Reassessment in California: What Happens When You Inherit a Home

Inheriting real estate in California can come with more than just sentimental value—it can also trigger significant property tax consequences. Thanks to Proposition 19, passed in 2020, the rules around property tax reassessment following a parent-to-child transfer have changed.

General Rule: Property Tax Reassessment on Transfer

In California, any change in ownership typically prompts the county assessor to reassess the property’s value at current market rates. This reassessment usually results in higher property taxes for the new owner, based on the updated value. This is standard when a property is bought or sold.

However, when a property is inherited, the rules differ slightly. The value for property tax purposes is reassessed as of the date of death, unless an exclusion applies.

Proposition 19: Limited Parent-to-Child Transfer Exclusion

Under Proposition 19, a parent-to-child (or grandparent-to-grandchild, if the parent is deceased) exclusion from reassessment may apply—but only under specific conditions:

  • Primary Residence Requirement: The inherited property must have been the parent’s primary residence and must become the child’s (or grandchild’s) primary residence within one year of the transfer.
  • Filing Requirement: The new owner must file a Claim for Reassessment Exclusion with the county assessor’s office within the required timeframe.
  • Value Cap: The exclusion only applies if the property’s current market value does not exceed the prior assessed value by more than $1 million. Any value over that threshold will be reassessed.

What If the Property Is Not Used as a Primary Residence?

If the child does not use the home as a primary residence—such as renting it out or keeping it as a vacation property—the property will be reassessed at fair market value. This reassessment can lead to a substantial increase in property taxes.

Example:
A mother passes away, leaving her primary residence to her son. If the son moves into the home and designates it as his primary residence, he may qualify for the exclusion, continuing to pay the property tax amount his mother was paying—subject to the $1 million value cap.
However, if he chooses to rent the property or sell it, he will not qualify for the exclusion and the property will be reassessed at market value.

Other Inherited Properties: No Exclusion for Secondary Residences or Rentals

Proposition 19 eliminated the previous unlimited exclusion for inherited second homes and rental properties. Now, only one primary residence transfer is eligible, and all other properties, including vacation homes and investment properties, will be reassessed upon transfer.

Planning Ahead

Estate planning strategies can help minimize the tax impact of inherited property. If you’re considering leaving real estate to your children or are in the process of inheriting a home, visit Bazikyan Law Group’s Blog.