Proposition 13 & Property Tax Implications
Understanding how California's landmark tax law affects inherited and transferred property
Proposition 13 & Property Tax Implications
California's Proposition 13 (1978) limits property tax increases to 2% per year based on the assessed value at the time of purchase.
- When a property transfers through an estate, trust, or probate, the assessed value is typically reassessed to current market value, which can significantly increase property taxes for the new owner.
How Property Tax Assessments Work
The Assessor's Office determines property taxes through an ad valorem (value-based) assessment.
- Rather than inspecting each property individually, the Assessor uses "Mass Assessments" based on all sales transactions and market activity recorded through March 31 of each year.
- The Assessor's Office is triggered when the property title changes hands — not by the date of death.
- This means your assessed value may not reflect your property's actual condition or unique characteristics.
Parent–Child Exclusion (Prop 19)
As of February 16, 2021, Prop 19 limits the parent-to-child transfer exclusion.
- The inherited home must become the child's primary residence within one year to qualify for a partial exclusion.
Prop 13 & Title Transfer
Reassessment is triggered when the property title transfers to a new owner — not at the date of death.
At that point, the county assessor reassesses to current fair market value, making an accurate appraisal critical.
Stepped-Up Basis (IRS Capital Gains)
- When a property owner dies, the IRS resets the cost basis to the fair market value at the date of death.
- Neither the IRS nor the Assessor's Office receives the appraisal at that time — it simply needs to exist as documentation.
- When the property is eventually sold, the taxable gain is calculated from that DOD value forward, not from the original purchase price.
- Without a certified DOD appraisal on file, heirs may face a much larger capital gains bill at sale.
Why an Appraisal Matters
- An independent certified appraisal establishes the fair market value used for reassessment.
- An accurate appraisal protects heirs from overpaying property taxes and satisfies both the IRS and the County Assessor.
Need a certified appraisal for a property transfer or estate?
Sue will walk you through the process and make sure you have the documentation you need — for the IRS, the County Assessor, and your peace of mind.