Prop 19 and Inherited Property: A Game Changer for California Families

Inheriting real estate used to come with a significant tax advantage in California—until Prop 19 changed the game.

Before Prop 19 passed in 2020, many families could inherit a parent’s home (or even a vacation property) and keep the low property tax basis that their parents had. That meant huge savings for heirs, even if they used the property as a rental or second home.

But now?

Under Prop 19: Property Tax Breaks Are Only Preserved for Primary Residences

As of February 16, 2021, heirs can only keep the original tax basis if:

The property was the primary residence of the parent or grandparent at the time of transfer
The inheriting child or grandchild makes the property their own primary residence within one year

And even then, there’s a cap: only the first $1 million in assessed value is excluded from reassessment. Anything above that gets taxed at current market value.

Let’s say your parents bought a home in 1985 for $150,000. Their property taxes are based on that value. But if that home is now worth $800,000 and you decide to rent it out instead of living in it, you’ll be taxed on the new market value—potentially doubling or tripling your annual property taxes overnight.

What This Means for Families

Prop 19 forces hard decisions:

Should you move into the inherited home to keep the tax break?
Should you sell it quickly to avoid rising tax costs?
Could it still make sense as a rental or 1031 exchange despite higher taxes?

It’s complicated—but that’s where local experts like myself come in.

Don’t Navigate This Alone

If you’ve recently inherited property—or expect to soon—let’s talk. I’ll walk you through your options based on current market conditions and help you avoid costly mistakes.

👉 Stay tuned for Part 3 in our Prop 19 series, where we’ll break down strategies for selling, renting, or exchanging inherited homes under this new law.