I frequently receive questions regarding the transfer of property taxes on inherited properties, so below are the “broad strokes” of the current California property tax laws. This is not to be construed as tax advise and you should consult with a CPA for verification and additional details.
For Transfers Between Parents-to-Children and Grandparents-to-Grandchildren
Proposition 19 (operative 2/16/2021) revised the California property tax laws to limit the transfer of property from a parent-to-child or grandparent-to-grandchild (if grandchild’s parents are deceased), without an increase in property taxes, for only those recipients that live in the property within one year of the transfer. If the original owner is deceased, the date of death is considered the date of transfer.
There is a limit to the value that can be excluded for a family home, which is $1 million over the taxable value (Note: The $1 million allowance will be adjusted annually by the State Board of Equalization (BOE) beginning in 2023.).
For example, if the taxable value is $250,000 but the fair market value is $1,500,000, the new taxable value is calculated as follows:
| Step 1 | ||
| Existing Taxable Value | + | $250,000 |
| Prop. 19 Allowance | + | $1,000,000 |
| Excluded Amount | = | $1,250,000 |
| Step 2 | ||
| Fair Market Value | + | $1,500,000 |
| Excluded Amount | – | $1,250,000 |
| Additional Taxable Value* | = | $250,000 |
| Step 3 | ||
| Existing Taxable Vale | + | $250,000 |
| Additional Taxable Value | + | $250,000 |
| New Taxable Value | = | $500,000 |
*If the “Additional Taxable Value” is a negative value, the New Taxable Value does not change from the “Existing Taxable Value.”