Under California Proposition 19 (effective February 2021), inherited property only retains the parent's low property tax base if the child uses it as their primary residence. The exclusion is capped at the prior taxable value plus $1,044,586 (2025-2027 threshold). Inherited properties used as rentals or second homes are reassessed to current market value, often increasing annual property taxes 5-10x.

Proposition 19 fundamentally changed the economics of keeping inherited property in California. Before February 2021, children could inherit their parents' Proposition 13-protected low tax basis regardless of how they used the property. Today, that benefit only applies if you move in.

For families with long-held properties in Pasadena, Altadena, and throughout LA County, this change often tips the decision from "keep" to "sell." Understanding the math is essential.

How Prop 19 Changed Everything

Before Prop 19 (Pre-February 2021):

• Children could inherit parents' property tax basis on primary residence (up to $1 million assessed value)
• Additional properties could transfer up to $1 million in assessed value
• No requirement to live in the property
• Rentals and second homes kept low taxes

After Prop 19 (February 16, 2021+):

• Child MUST use inherited home as primary residence to preserve low tax basis
• Exclusion capped at prior assessed value plus $1,044,586 (2025-2027)
• Rentals and second homes are fully reassessed at current market value
• Must file within one year of transfer to claim exclusion

The Math That Changes Decisions

Illustrative Example: Inherited 1970s Ranch in Pasadena

• Original purchase price (1975): $85,000
• Current assessed value with Prop 13 growth: $220,000
• Current market value: $1,500,000
• Annual property tax at old basis: approximately $2,200

Scenario A: Child moves in as primary residence

New assessed value = $220,000 + $1,044,586 = $1,264,586. Property tax increases to approximately $12,646/year—still a significant savings versus full reassessment.

Scenario B: Child keeps as rental or second home

Property fully reassessed at $1,500,000. Annual property tax jumps to approximately $15,000/year. That's nearly $13,000 more per year than parents paid.

Strategies to Maximize Prop 19 Benefits

1. Move In (Even Temporarily)

If you can legitimately make the inherited home your primary residence, you preserve the tax basis.

2. File Within One Year

The exclusion claim must be filed within one year of the transfer date. Missing this deadline forfeits the benefit entirely. File Form BOE-19-P with your county assessor.

3. Consider Selling Before Reassessment

If you're not going to live in the property and plan to sell anyway, moving quickly can minimize holding costs.

4. Evaluate the Full Picture

Don't make decisions based on property tax alone. Consider capital gains tax implications, rental income potential, emotional factors, and your overall financial situation.

Frequently Asked Questions

What is the $1,044,586 exclusion amount?

This is the maximum amount added to the inherited property's existing assessed value when determining the new tax basis. The current amount applies to transfers between February 16, 2025 and February 15, 2027.

Does Prop 19 affect property I inherited before 2021?

No. Properties transferred before February 16, 2021 retain the old rules. Your existing low tax basis is protected regardless of how you use the property.

Can siblings share the primary residence exclusion?

Only the sibling who actually lives in the home as their primary residence can claim the exclusion. Other siblings inheriting a share will have their portions reassessed.

Related Guides

• Capital Gains Tax on Inherited Property 2025
• Inherited House With Mortgage: Your Options
• Complete Guide to Selling Inherited Property in California

Need Help Understanding Prop 19?

The Borges Real Estate Team specializes in helping families navigate Prop 19 decisions for inherited property.

📞 (213) 262-5092

Justin Borges

Justin Borges specializes in helping Pasadena-area families navigate the complexities of inherited property, including Proposition 19 implications. With 13+ years of real estate experience and deep roots in the San Gabriel Valley, Justin provides practical guidance for difficult decisions.