Understanding tax base is crucial this time of year and with California property taxes it can feel confusing — especially when family transfers, inherited homes, or long-held properties are involved. On top of the emotions of a transition in the family or even grief, working through tax codes can be daunting. As mortgage professionals who regularly help buyers and heirs navigate these situations, we see firsthand how misunderstandings around Proposition 13 and Proposition 19 can lead to costly surprises, but we also see how much of a relief it can be for our clients to have experienced experts on their team explaining what qualifies and wha doesn’t to keep the old tax base.
Let’s break down how California property tax really works, what you can (and can’t) keep when buying or inheriting property from family, and why working with an experienced lender and tax-savvy team matters.
Prop 13: The Foundation of California Property Tax
Passed in 1978, Proposition 13 fundamentally changed how property taxes work in California. Under Prop 13:
- Property tax is capped at approximately 1% of assessed value (plus local voter-approved assessments)
- The assessed value is set at the purchase price
- Annual increases are limited to a maximum of 2% per year
This means homeowners who purchased decades ago often pay dramatically lower property taxes than buyers purchasing the same home today.
Buying or Inheriting Property From Family: Can You Keep the Original Tax Base?
This is one of the most common — and misunderstood — questions we get from clients, so let’s talk about it.
Before 2021, many parent-to-child and grandparent-to-grandchild transfers could keep the original tax base. However, Proposition 19, which took effect in February 2021, significantly changed the rules.
Prop 19: When Can You Keep the Original Tax Base?
Under current law, you may keep the original property tax base only if all of the following conditions are met:
- The transfer is between parent and child (or qualifying grandparent-grandchild if parents are deceased)
- The inherited property becomes the child’s primary residence
- The child files the required claim within the allowed timeframe
- The property’s assessed value does not exceed the parent’s assessed value by more than $1 million
If the property value exceeds that threshold, the portion above it will be reassessed — increasing property taxes accordingly.
Keep this important detail in mind: Rental properties, vacation homes, or second homes no longer qualify for full tax base transfers under Prop 19.
What Does Not Qualify for Keeping the Old Tax Base?
Many situations unfortunately trigger a full or partial reassessment. Common examples include:
- Keeping the inherited home as a rental
- Using the property as a second home
- Failing to move in and establish primary residency
- Missing filing deadlines
- Sibling-to-sibling transfers
- Buying a home from family at market value (this is treated as a normal sale)
Even well-intentioned estate plans can backfire if Prop 19 rules are not carefully followed. If you’re wondering what to expect in your unique situation, it’s best to reach out to us early to find out what you can anticipate paying.
Required Forms & Filings
To preserve any eligible tax benefit, homeowners must file the appropriate paperwork with the county assessor.
In most cases, this includes:
- Claim for Reassessment Exclusion for Transfer Between Parent and Child
- Proof that the property is the claimant’s primary residence
- Documentation showing the relationship between transferor and transferee
Filing deadlines are critical. Late filings can permanently eliminate eligibility — even if all other conditions were met.
Why This Matters for Mortgages and Financing
Property tax impacts more than your annual bill — it directly affects debt-to-income ratios, loan qualification, monthly payments, and long-term affordability.
Our in house expert Jackie Barikhan says, “We routinely help clients evaluate scenarios such as inheriting a low-tax property but needing to refinance, buying out siblings after inheritance, purchasing a family home and restructuring financing, and understanding how reassessment will affect escrow payments. Without proper planning, buyers can qualify for a mortgage based on outdated assumptions — only to face higher payments once reassessment occurs.”
Why Planning Ahead Is Critical
Jackie goes on to say, “Prop 13 and Prop 19 are not just tax rules — they directly impact loan qualification and long-term affordability. We see clients get into trouble when tax reassessment isn’t accounted for upfront. The smartest buyers and heirs plan with both a lender and tax professional before making decisions.”
This is why working with an experienced lender who understands California-specific tax law is so important. Mortgage planning here is not one-size-fits-all.
Other Things California Homeowners Should Know About Tax Base
- Refinancing does not trigger reassessment
- Adding owners to title can trigger partial reassessment if done incorrectly
- Trust transfers must be structured carefully to avoid reassessment
- Moving after inheritance can eliminate eligibility retroactively
Each of these scenarios has real financial consequences, and mistakes are often irreversible.
California property tax rules can create incredible long-term savings — or unexpected financial strain — depending on how transfers and purchases are handled.
If you’re inheriting property, buying from family, or planning a move in California, it’s essential to work with professionals who understand Prop 13, Prop 19, and how property tax intersects with mortgage qualification.
As experienced California mortgage advisors, we help our clients navigate these complexities every day — so there are no surprises after the paperwork is signed. If you’re considering a move or transfer, let’s talk through your options before making a decision.
