Prop 19's $1M Inherited-Property Exclusion Cap Resets in February 2027
Many pages about inherited property tax still describe the old, uncapped Prop 58 rules. Prop 19 replaced them in 2021, and its exclusion cap changes every two years.
Before 2021, a parent could pass a home to a child and the child kept the parent's low Prop 13 assessed value for as long as they owned it, whatever the home was worth and whether or not the child lived there. Prop 19 ended that. For transfers between February 16, 2025 and February 15, 2027, a child who moves in as their primary residence within a year keeps the parent's factored base year value plus up to $1,044,586 of the home's market value above that base. Any market value beyond that is added to the base year value and taxed.
Going over the cap reduces the exclusion; it doesn't cancel it
Many families read the cap as a pass/fail test. It isn't one. Say a parent's home has a factored base year value of $300,000 and a market value of $1.5M at the time of transfer.
The difference is $1.2M, which is more than the current $1,044,586 exclusion. The child still gets the full $1,044,586 excluded. Only the remainder above it is added to the new base year value.
The new assessed value is well below full market value, though higher than the parent's.
Why the cap keeps moving
The State Board of Equalization adjusts the cap every two years. The current $1,044,586 applies only to transfers from February 16, 2025 through February 15, 2027, and the next adjustment is expected on February 16, 2027. If you're reading another article or using another calculator, check which period its figure is for. One written before the last adjustment will show the old cap.
The primary residence rule disqualifies more families than the dollar cap
The exclusion applies only if the child (or a grandchild, in a qualifying case) moves into the inherited home as their principal residence within one year of the transfer and files for the homeowners' exemption on it.
A rental property, a vacation home, or a home the heirs plan to sell without living in it gets no exclusion, whatever its value. The pre-2021 Prop 58 rules had no occupancy requirement, so this is the bigger change for many families.
Filing the standard $7,000 homeowners' exemption on the property is how you document to the assessor that you live there.
This is separate from the age-55+ transfer rules
Prop 19 also created a second benefit. Homeowners who are 55 or older, severely disabled, or victims of a disaster can carry their own base year value to a replacement home anywhere in the state. That rule has nothing to do with the parent-child exclusion covered here, even though many articles put both under one "Prop 19" headline.
Run your own numbers
Our Prop 19 Inherited Property Calculator runs this math for your numbers: factored base year value, the current exclusion cap, and the amount that gets reassessed. It takes the cap and its effective dates from the BOE's published figures.
Frequently Asked Questions
What is the Prop 19 inherited property exclusion cap right now?
For transfers occurring between February 16, 2025 and February 15, 2027, the exclusion covers the home's factored base year value plus up to $1,044,586 of market value above that. The cap adjusts every two years, so it will change again after February 15, 2027.
Do I lose the whole exclusion if the home is worth more than the cap?
No. You keep the exclusion up to the cap. Only the market value above the cap is added to the base year value and taxed. The cap reduces the benefit; it does not cancel it.
Does a rental or vacation home inherited from a parent qualify?
No. Since Prop 19 took effect, the child must move into the home as their primary residence within one year of the transfer for any exclusion to apply. Rental, investment and vacation properties do not qualify, whatever their value.
This article is for general information only and is not legal or tax advice. Confirm your exact base year value and exclusion amount with your county assessor before making an inheritance or estate-planning decision.