Can I Keep My Parents' Property Tax Rate When I Inherit Their Home?

The short answer: Sometimes, but only if you live in it. Under California's Proposition 19, you can inherit your parents' low property tax base only if you move into the home as your primary residence within one year of the transfer. If you plan to rent it out, use it as a vacation home, or leave it vacant, the property will be fully reassessed at current market value, potentially increasing your annual property tax bill by thousands of dollars.

This guide explains exactly how Prop 19 works, what changed from the old rules, and how to claim the exclusion before it's too late.

What Is Proposition 19 and When Did It Take Effect?

Proposition 19, officially titled "The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act," was approved by California voters in November 2020. The parent-child transfer provisions took effect on February 16, 2021.

The proposition made significant changes to California's property tax inheritance rules, fundamentally altering how families can pass down property tax benefits to the next generation.

According to the California State Board of Equalization, Prop 19 limits the parent-child transfer exclusion to transfers of:

1. A family home that was the principal residence of the transferor (parent) and becomes the principal residence of the transferee (child)
2. A family farm

This means the days of inheriting rental properties, vacation homes, or investment properties with your parents' low tax base are over.

How Prop 19 Changed Everything: Before vs. After

Understanding what changed helps you appreciate why this matters so much for California families.

Under Proposition 58 (1986-2021)

Before Prop 19, California's Proposition 58 was remarkably generous:

• Parents could transfer their primary residence to children of any value without reassessment
• An additional $1 million of assessed value could be excluded for other properties (rentals, vacation homes, commercial properties)
• Children did not need to live in the inherited property
• The property could be rented out indefinitely while maintaining the parent's low tax base

For families who bought homes in the 1970s or 1980s, this meant passing down property tax bills of just a few thousand dollars per year on properties now worth millions.

Under Proposition 19 (2021-Present)

Prop 19 dramatically restricted these benefits:

• Only the primary residence (or family farm) qualifies for the exclusion
• The child must move in and use it as their primary residence within one year
• A value cap applies (more on this below)
• The child must continue living there to maintain the exclusion
• Rental properties, vacation homes, and commercial properties no longer qualify

As noted by the Sacramento County Assessor, "The transfer of a rental home between parents and children would not qualify for the exclusion."

The Primary Residence Requirement Explained

This is the most critical requirement under Prop 19 California rules. Here's exactly what it means:

For the Parent (Transferor)

The property must have been the parent's principal residence at the time of transfer. This is typically documented through:

• Homeowners' exemption records
• Voter registration
• Tax returns showing the address
• Driver's license address

For the Child (Transferee)

You must:

1. Move into the property as your primary residence within one year of the transfer date (for inherited property, this is the date of death)
2. File for the Homeowners' Exemption (or Disabled Veterans' Exemption) within one year of the transfer
3. Continue to occupy the property as your primary residence to maintain the exclusion

According to the California State Board of Equalization, "At least one eligible recipient must continually live in the property as their family home for the property to maintain the exclusion."

What If Multiple Siblings Inherit?

If multiple siblings inherit the family home jointly, only one sibling needs to live in it to qualify for the exclusion. However, if that sibling moves out, another sibling must move in within one year of the move-out date to maintain the exclusion.

The $1 Million Exclusion Cap: How It Actually Works

Even if you meet the primary residence requirement, there's a limit to how much of the tax benefit you can inherit. This is where the $1 million exclusion cap comes in.

Current Exclusion Amounts

The Board of Equalization adjusts this amount every two years based on the California Consumer Price Index:

Source: BOE News Release 2025/02

How the Calculation Works

The excluded amount equals the property's Factored Base Year Value (FBYV) plus the current exclusion amount. Any market value above this threshold gets added to your taxable value.

Formula:

• Excluded Amount = Parent's Factored Base Year Value + $1,044,586
• If Fair Market Value > Excluded Amount, the excess is added to your tax base

Real Example Calculations: What You'll Actually Pay

Let's look at two realistic scenarios to understand the financial impact.

Example 1: Property Within the Exclusion Cap

Situation: You inherit your parents' Riverside County home. They bought it in 1985.

• Parent's Factored Base Year Value: $180,000
• Current Fair Market Value: $850,000
• Exclusion Amount: $180,000 + $1,044,586 = $1,224,586

Result: Since $850,000 is less than $1,224,586, you inherit the full $180,000 tax base.

Annual Property Tax Comparison:

• Your inherited tax (at ~1.1%): $1,980/year
• Reassessed tax (at ~1.1%): $9,350/year
• Annual savings: $7,370

Example 2: Property Exceeding the Exclusion Cap

Situation: You inherit your parents' Orange County home. They bought it in 1978.

• Parent's Factored Base Year Value: $300,000
• Current Fair Market Value: $1,800,000
• Exclusion Amount: $300,000 + $1,044,586 = $1,344,586
• Excess Amount: $1,800,000 - $1,344,586 = $455,414

Result: Your new tax base is $300,000 + $455,414 = $755,414

Annual Property Tax Comparison:

• Your partially-excluded tax (at ~1.1%): $8,310/year
• Fully reassessed tax (at ~1.1%): $19,800/year
• Annual savings: $11,490

Example 3: No Exclusion (Rental Property or Non-Primary Residence)

Situation: You inherit your parents' Los Angeles rental property and don't move in.

• Parent's Factored Base Year Value: $200,000
• Current Fair Market Value: $1,200,000

Result: Full reassessment to $1,200,000.

Annual Property Tax Impact:

• Previous tax (parent's): $2,200/year
• Your reassessed tax: $13,200/year
• Annual increase: $11,000

Timeline Requirements: The One-Year Deadline Is Critical

Missing the one-year deadline can cost you the entire exclusion, retroactively. Here's what you need to do and when:

Within One Year of Transfer (Date of Death)

1. Move into the property as your primary residence
2. File for Homeowners' Exemption with the County Assessor
3. These are prerequisites for the Prop 19 exclusion

Within Three Years of Transfer

• File Form BOE-19-P (Claim for Reassessment Exclusion for Transfer Between Parent and Child) with your County Assessor

According to the California State Board of Equalization, if you file the Homeowners' Exemption after the one-year period, "the exclusion will be applied prospectively if filed after 1-year period." This means you'll owe the higher reassessed taxes for the period before you filed.

What If You Miss the Deadline?

If you file late:

• You may still qualify for the exclusion going forward
• But it won't be backdated to the date of transfer
• You'll owe the difference in property taxes for the gap period
• Supplemental tax bills may have already been issued

What Happens If You Don't Move In: Full Reassessment

If you inherit your parents' home and don't move in as your primary residence, the property will be fully reassessed at current market value.

This means:

• The County Assessor will determine the fair market value as of the date of death
• Your new property tax base will be this full market value
• You'll receive a supplemental tax bill for the difference
• Annual property taxes could increase dramatically

For a home that's appreciated significantly since the 1970s or 1980s, this could mean property taxes jumping from $2,000-3,000 per year to $15,000-25,000 or more.

If You Move In, Then Move Out Later

The exclusion isn't permanent. According to the Board of Equalization, if you vacate the property, "it will receive a new taxable value as of the lien date following the date you no longer occupy the property as your principal residence."

This means you can't:

• Move in for a year, then convert it to a rental
• Live there briefly to "lock in" the low tax base, then move out
• Use it as a vacation home after establishing residency

How to Claim the Prop 19 Exclusion: Step-by-Step Process

Step 1: File for Homeowners' Exemption (Within 1 Year)

Contact your County Assessor's office to file for the Homeowners' Exemption. This:

• Reduces your assessed value by $7,000 (saving about $70/year)
• More importantly, documents that you're using the property as your primary residence
• Is a prerequisite for the Prop 19 exclusion

Step 2: Obtain Form BOE-19-P

Get the Claim for Reassessment Exclusion for Transfer Between Parent and Child form from:

• Your County Assessor's office
• The California State Board of Equalization (sample form)
• Most County Assessor websites have downloadable versions

Step 3: Gather Required Documentation

You'll typically need:

• Death certificate (for inherited property)
• Proof of relationship (birth certificate, etc.)
• Documentation showing the property was the parent's primary residence
• Proof that you've moved in and made it your primary residence

Step 4: Submit to County Assessor

File the completed BOE-19-P form with the Assessor's office in the county where the property is located. File within three years of the transfer date or before selling to a third party, whichever comes first.

Step 5: Respond to Any Follow-Up

The Assessor may request additional documentation to verify eligibility. Respond promptly to avoid delays.

Planning Strategies for Families

If you're expecting to inherit California property, or if you're a parent planning your estate, consider these strategies:

For Parents

1. Understand the new rules apply regardless of your estate plan
2. Discuss with your children whether they can realistically move into the property
3. Consider gifting during your lifetime (the same Prop 19 rules apply, but planning may help)
4. Consult with an estate planning attorney about trust structures and timing

For Children Expecting to Inherit

1. Have honest conversations with your parents about the property
2. Evaluate whether you can actually move in within one year
3. Factor property taxes into your decision about keeping vs. selling
4. Consider refinancing options if you plan to keep the home

If you decide to keep an inherited property, you may need to refinance the existing mortgage or take out a new loan. For higher-value California properties, a jumbo loan may be necessary.

When Selling Might Make More Sense

Sometimes, selling the inherited property is the better financial decision:

• If you can't or won't move into it as your primary residence
• If the carrying costs (mortgage, taxes, insurance, maintenance) are too high
• If you need the equity for other purposes
• If multiple heirs can't agree on what to do with the property

Remember: you still get a stepped-up basis for capital gains purposes, which can significantly reduce taxes if you sell.

Frequently Asked Questions About Prop 19 California

Can I inherit my parents' property tax rate if I already own a home?

Yes, but you must make the inherited property your primary residence. You cannot claim the Prop 19 exclusion while maintaining a different primary residence. You would need to either sell your current home, convert it to a rental, or choose not to claim the exclusion on the inherited property.

What if my parents owned the home in a trust?

The property can still qualify for the exclusion if it's held in a revocable living trust. The key requirements remain the same: it must have been your parent's primary residence, and it must become your primary residence within one year. Consult with the trust attorney to ensure proper documentation.

Does Prop 19 apply to grandparent-to-grandchild transfers?

Yes, but only if the parent (the grandparent's child) is deceased at the time of transfer. If your parent is still living, you cannot receive the exclusion directly from a grandparent.

Can I rent out part of the inherited home and still qualify?

Potentially, if you maintain it as your primary residence. For example, if you live in the main house and rent out an ADU (Accessory Dwelling Unit) on the property, you may still qualify. However, consult with the County Assessor, as this can be a gray area.

What happens if I inherit the property with my siblings and only one of us moves in?

Only one sibling needs to live in the property to maintain the exclusion for the entire property. However, all co-owners should understand that if the residing sibling moves out, another sibling must move in within one year, or the exclusion is lost.

Is there any way to avoid Prop 19's restrictions?

The rules are constitutional (Article XIII A) and apply broadly. Some families have explored:

• Gifting property before February 16, 2021 (no longer possible)
• Selling the property to children at fair market value (doesn't help with property taxes)
• Creating complex trust structures (limited effectiveness)

Consult with a qualified estate planning attorney for your specific situation. Be wary of any "loopholes" that seem too good to be true.

The Bottom Line: Act Quickly and Make an Informed Decision

California's Proposition 19 fundamentally changed property tax inheritance rules. If you've inherited or expect to inherit California property:

1. Understand the primary residence requirement is non-negotiable
2. Act within one year to file for Homeowners' Exemption and move in
3. File Form BOE-19-P within three years
4. Make an informed decision about whether to keep or sell based on your actual ability to live in the property

The potential property tax savings of keeping your parents' low tax base can be substantial, saving thousands of dollars per year. But those savings only materialize if you actually move in and make it your primary residence.

If you're considering keeping an inherited California property and need financing options, we can help you explore refinancing or jumbo loan solutions that work for your situation.

Last verified: January 2026. Property tax laws and exclusion amounts are subject to change. This article is for informational purposes only and does not constitute legal or tax advice. Consult with qualified professionals for advice specific to your situation.

Sources: California State Board of Equalization, BOE Prop 19 Fact Sheet, Sacramento County Assessor