Fresno Inheritance Guide › Prop 19 and taxes
Prop 19, and the two taxes that matter on an inherited house.
The property tax can go up several times over. The capital gains tax usually goes away. Both turn on dates, and one deadline is short. What follows is general information for a Fresno house; your tax advisor and the Fresno County Assessor confirm your own numbers.
1. Property tax
What changed on February 16, 2021.
- Before Prop 19
A parent could leave a child the family home, plus other property up to $1 million of assessed value, and the child kept the parent’s property tax bill. That was Proposition 58, from 1986.
- After Prop 19
The exclusion now covers only the parent’s own home, and only if a child moves in and makes it their principal residence within one year of the transfer. The date of the transfer is the date of death. Everything else, a rental, a second house, the house nobody moves into, is reassessed to its market value as of that date.
- The cap, even when a child moves in
The old assessed value carries over only up to that value plus an allowance, which started at $1 million and is adjusted every two years. If the house’s market value is more than the old assessed value plus the allowance, the difference is added. For most Fresno houses the allowance covers it.
- Grandparent to grandchild
The same rules, and only if the grandchild’s parents who were children of that grandparent have died.
- Between spouses
Not reassessed. A surviving spouse keeps the bill.
What it looks like on a Fresno house
| Assessed value | Tax, roughly | |
|---|---|---|
| Parent’s bill, house bought in 1985 | $90,000 | $1,100 a year |
| Reassessed at death, nobody moves in | $350,000 | $4,200 a year |
| A child moves in within the year and files | $90,000 | $1,100 a year |
2. The forms and the deadlines
Three pieces of paper, all to the Fresno County Assessor at the Hall of Records.
- Within 150 days of the death
Whoever is handling the estate sends the assessor a Change in Ownership Statement, Death of Real Property Owner (form BOE-502-D). It is required whether or not anyone is moving in, and there is a penalty for not sending it. If the estate goes through probate, it is due when the inventory is filed with the court.
- Within one year, if a child is moving in
The child files the claim for the parent-child exclusion (form BOE-19-P) and the homeowners’ exemption (form BOE-266) for the house. Both within a year of the date of death. A claim filed late can still get relief, but generally only from the year it is filed, not back to the date of death.
- Months later
If the house was reassessed, a supplemental bill arrives for the part of the year after the death. It is separate from the regular December and April installments, it comes to whoever is on the assessor’s records, and escrow does not always know about it. Budget for it.
Revenue and Taxation Code sections 63.2 (Prop 19 parent-child and grandparent-grandchild transfers), 480(b) and 482 (the death-of-owner statement and penalty), 75 and following (supplemental assessments). California State Board of Equalization, Proposition 19 guidance and forms. Fresno County Assessor-Recorder, 2281 Tulare Street, Fresno.
3. Capital gains
The one that usually falls away.
- The step-up
For income tax, an inherited house takes a new cost basis equal to its fair market value on the date of death. The gain on a later sale is measured from that value, not from what your parents paid in 1985. A house sold within a year or so of the death, at about its date-of-death value, usually produces little or no capital gains tax.
- Community property
If your parents owned the house together as community property in California, the whole house, both halves, stepped up when the first of them died, and again when the second did. Your tax advisor confirms how title was held.
- Selling for less
An as-is sale, after selling costs, often closes below the appraised date-of-death value. That is a loss, not a gain, and an estate or trust may be able to report it. Inherited property counts as held long-term whatever the dates.
- The date-of-death appraisal
Get one, from a licensed appraiser, as of the date of death. It fixes the basis. A buyer’s offer, including ours, does not, and neither does an online estimate.
- Keeping it as a rental
Depreciation starts from the stepped-up value, and the Prop 19 reassessment applies, since nobody is living in it as their home.
- Estate tax
California has no estate or inheritance tax. The federal estate tax reaches only estates above the exemption, which is in the tens of millions of dollars per person. For almost every Fresno family it does not apply.
Internal Revenue Code sections 1014 (basis of inherited property), 1014(b)(6) (community property), 1223(9) (holding period). General information, not tax advice.
4. What it means for the decision
- If a child means to live there, file the claim and the exemption inside the year, before anything else is decided. The savings last as long as that child keeps the house as their home.
- If nobody is moving in, the tax went up on the date of death whether the family sells or keeps the house. Holding it empty while everyone decides costs the new tax rate, the insurance and the upkeep, every month.
- If you sell, the gain is measured from the date-of-death value, so a sale within the year rarely produces an income tax bill, listed or direct.
- A surviving parent who wants to move can, if 55 or older, sell and carry the old property tax base to a replacement home anywhere in California, up to three times. That is the other half of Prop 19, and it changes the arithmetic for a parent who is thinking of downsizing now rather than leaving the house to the children later.
Questions
- The house was my mother’s rental. If I move in, do I keep her tax bill?
No. The exclusion applies only to the parent’s own principal residence, and then only if a child makes it theirs within a year. A rental is reassessed at the date of death.
- Does selling the house trigger the reassessment?
The death did. A sale changes who pays going forward: the buyer is reassessed at the price they pay, and the estate’s share of the year’s tax is settled in escrow.
- We missed the one-year deadline. Is it lost?
Not entirely. A late claim can still bring relief going forward, from the year it is filed. Talk to the assessor and a probate attorney before assuming either way.
- Is there capital gains tax if we sell to you?
The rule is the same whoever buys. Gain is measured from the date-of-death value. A sale at or below that value is not a gain. Your tax advisor confirms with the appraisal in hand.