Will my inherited house be reassessed under Prop 19?

The short version: move in or get reassessed

Before Prop 19, California let parents pass a home to their kids and keep the old property tax value, even if the kids turned it into a rental. Plenty of families did exactly that. Prop 19 ended most of it.

According to the State Board of Equalization (BOE), Prop 19 applies to transfers that occur on or after February 16, 2021. For those transfers, the parent-child exclusion covers a family home only if it was the principal residence of the parent and becomes the principal residence of the child. The BOE says plainly that a rental home transferred between parents and children does not qualify.

If no child moves in, the home is generally reassessed to market value as of the transfer. That can turn a property tax bill from the price of a nice dinner into the price of a used car. Every year.

Transfers on or before February 15, 2021 fall under the old rules (Propositions 58 and 193). If your parent passed before that date, have a professional confirm which rules apply.

What counts as moving in

The BOE describes a principal residence as a person's true, fixed and permanent home. Not a weekend place. Not the house where you store the boat.

A few rules from the BOE that matter:

• Only one child needs to live there. At least one eligible child must continually live in the property as their family home.
• It has to happen within one year. The BOE says the child must file for the homeowners' exemption (or the disabled veterans' exemption) within one year of the death or transfer. In practice, the house needs to be the child's real home within that first year.
• It has to stay that way. If the property stops being the child's principal residence, it gets a new taxable value. The BOE says reassessment happens as of the next lien date after the move.

Grandparent-to-grandchild transfers can also qualify, but the BOE notes the grandchild's parent must be deceased on the date of transfer. That one has its own claim form.

The two deadlines you cannot miss

Prop 19 has two separate filings. Families often do one and forget the other, like remembering the cake and forgetting the candles.

Miss them and the door does not slam completely. The BOE says a late filing gets the exclusion only going forward. Earlier years do not get fixed.

The county assessor handles these claims. Call them early. They answer this question every day.

Moving in does not always mean no tax increase

Here is the part that surprises people. Even when a child moves in and files on time, the exclusion has a cap.

The BOE explains that the value limit is the home's factored base year value (its current taxable value) plus $1 million, and that amount is adjusted every two years. For transfers from February 16, 2025 to February 15, 2027, the BOE lists the adjusted amount as $1,044,586. Any market value above the limit is added to the taxable value.

The BOE's own example: a home with a $300,000 factored base year value and a $1,500,000 market value. The excluded amount is $1,300,000. The extra $200,000 gets added, for a new taxable value of $500,000.

Notice what drives that math: market value on the date of transfer. In high-priced markets, where the gap between an old tax value and today's price can be huge, the market value number matters a lot. The assessor will set one. You are allowed to know whether it is right.

This is general information. Tax treatment depends on the facts, so confirm with a CPA or tax attorney before you file.

Where an appraisal fits

A date-of-death appraisal does double duty in a Prop 19 situation. It supports the stepped-up income tax basis for the heirs, and it gives you an evidence-based market value as of the transfer date to compare against the assessor's number.

When I value a home for this purpose, I value it as of the date of death or transfer, in the condition it was in that day. That means the sales I use are the ones from that market, and the adjustments come from what buyers actually paid for differences, not from a rule of thumb. If the assessor's figure is out of line with the evidence, a well-supported report gives you something concrete to talk about. Uncle Ray's opinion that "houses on this street go for about a million" does not.

What to do in the first year

1. Decide early whether a child will live in the house as their main home. The one-year clock starts at death or transfer.
2. If someone moves in, file the homeowners' exemption within one year.
3. File the BOE-19-P claim with the county assessor within three years, or before any sale to a third party, whichever comes first.
4. Order a date-of-death appraisal so you have a supported market value for both basis and the Prop 19 math.
5. Take photos before you renovate. The value is tied to the home's condition on the transfer date.
6. Talk to your CPA or attorney if the property is a rental, a family farm, held in a trust, or shared by several heirs.