Blog · Estate and Inheritance

Does California Have an Estate Tax or Inheritance Tax? What Heirs Actually Pay

Does California have an estate tax or inheritance tax? No. California has neither one. Voters repealed the state inheritance and gift tax in June 1982, and the law now bars the state and every city and county from taxing a transfer at death.

That's the short answer, and it's good news. The longer answer has a few catches. There is still a federal estate tax for very large estates, and the taxes that actually hit most Bay Area heirs are property tax under Prop 19 and income tax on inherited retirement accounts. Those are the ones worth planning for.

Quick note on who is talking. opfinances.com is a licensed life insurance and annuity agency in Los Gatos. We are not a tax adviser, not a law firm, not a financial advisor, and not a fiduciary. This is general education about how the rules work, not tax or legal advice.

The short version

• California has no estate tax, no inheritance tax and no gift tax. Revenue and Taxation Code section 13301 prohibits them.
• The federal estate tax exemption is $15,000,000 per person for 2026, so a married couple can pass about $30,000,000 with planning. Very few estates owe it.
• Prop 19 can raise property tax on an inherited home. The parent to child exclusion is capped at the home's taxable value plus $1,044,586 through February 15, 2027.
• Inherited IRAs and 401(k)s are still taxed as income when the heir withdraws the money, and California taxes that income too.

So, does California have an estate tax or inheritance tax?

No to both, and the two are not the same thing. An estate tax is charged on the estate itself before anything is handed out. An inheritance tax is charged to the person who receives the property. California repealed its inheritance tax with Proposition 6, which voters passed on June 8, 1982.

Section 13301 of the Revenue and Taxation Code now says the state and its political subdivisions cannot impose a gift, inheritance, succession, legacy or estate tax. That language covers counties and cities too, so there is no Santa Clara County death tax hiding underneath.

One technical footnote. Section 13302 still has a so called pick up tax on the books. It only applies to the extent the federal government allows a credit for state death taxes, and that federal credit no longer exists, so in practice it collects nothing.

Is there a California inheritance tax in 2026?

No. Nothing changed for 2026. Your heirs do not owe California anything just for receiving what you leave them. The exception is when you own property in another state. Some states, like Oregon and Washington, have their own estate tax, and a few, like Pennsylvania and New Jersey, have an inheritance tax. A vacation cabin over the state line can pull that state's rules in.

The federal estate tax exemption for 2026 is $15 million.

The only death tax a California estate can owe is federal. For deaths in 2026, the basic exclusion amount is $15,000,000 per person. That number was set by the 2025 federal tax law, and the IRS will adjust it for inflation starting in 2027. A lot of people expected the exemption to drop to around $7 million in 2026, and that never happened.

If the gross estate plus large lifetime gifts is under $15,000,000, no federal estate tax is owed and in most cases no estate tax return is required. Above it, the top rate is 40 percent on the amount over the line.

For married couples there is portability. When the first spouse dies, the survivor can keep that spouse's unused exclusion, but only if an estate tax return, Form 706, is filed on time for the first spouse. Plenty of families skip that filing because no tax is due. For a larger Bay Area estate, skipping it can get expensive later.

Gifts count against the same $15 million.

California has no gift tax either. Federally, you can give up to $19,000 per person in 2026 without filing anything. Gifts above that just get reported and reduce your $15,000,000 lifetime amount. Very few families ever owe gift tax out of pocket.

Prop 19 is the tax that actually hits Bay Area heirs.

For most local families, the real cost of inheriting a house is property tax. Under Prop 13 a home is taxed on its base year value, which only rises a little each year. A house bought in Los Gatos in the 1990s might carry a taxable value that is a fraction of what it would sell for today.

Prop 19, in effect since February 16, 2021, changed what happens when that house passes to a child. The child can keep the parents' lower taxable value only if the home becomes the child's primary residence. Even then the break is capped. For transfers from February 16, 2025 through February 15, 2027, the cap is the home's factored base year value plus $1,044,586. Anything over that gets added to the taxable value.

A rental, a second home, or a house the kids sell instead of moving into gets reassessed to full market value. That is often the single biggest tax surprise for a family in Santa Clara County.

A worked example: a Los Gatos estate with no estate tax due.

These numbers are illustrative only. Say a widowed Los Gatos homeowner dies in 2026. She leaves a house worth $2,400,000 with a factored base year value of $650,000, an IRA worth $600,000, a brokerage account worth $500,000, and a $250,000 life insurance policy she owned. Her two adult children inherit everything.

Her gross estate is about $3,750,000, life insurance included. That is far under the $15,000,000 federal line, so no federal estate tax. California charges nothing. So far, $0 in death taxes.

Now the house. If one child moves in as a primary residence, the protected amount is $650,000 plus $1,044,586, or $1,694,586. The home is worth $2,400,000, so the $705,414 difference is added, and the new taxable value is about $1,355,414 instead of $650,000. If neither child moves in, it is reassessed to the full $2,400,000.

The house and brokerage account do get a step up in basis to their value at her death, so selling soon after usually means little or no capital gains tax. The IRA is the opposite. Every dollar the kids take out is taxed as ordinary income, federal and California, and most non spouse heirs have to empty it within 10 years. The life insurance death benefit generally comes to them income tax free.

What heirs in California still pay, and how families plan for it.

Put together, the taxes that matter for most families are not estate or inheritance taxes. They are property tax on the house, income tax on retirement accounts, and capital gains if an asset is sold long after the death. Our pages on whether children get a step up in basis when they inherit a house and whether children pay taxes on a parent's 401(k) go deeper on each.

Married couples have one more advantage. When community property passes at the first death, both halves can get a new basis, not just the deceased spouse's half. We cover that in the step up in basis when a spouse dies in California.

• Check how the house is titled and whether a child would realistically move in. That decides the Prop 19 result.
• Keep beneficiary forms current on IRAs and 401(k)s, since the heir's tax bracket decides what that money is worth.
• For estates near or over $15,000,000, or married couples who might get there, ask an estate attorney about filing Form 706 at the first death for portability.
• Consider whether life insurance belongs in the plan. A death benefit can give heirs cash to cover property tax or buy out a sibling without selling the house.

FAQ

Questions people ask.

Does California have an estate tax or inheritance tax in 2026?

No. California has no estate tax, no inheritance tax and no gift tax. The inheritance tax was repealed by Proposition 6 in 1982, and Revenue and Taxation Code section 13301 prohibits them.

What is the federal estate tax exemption for 2026?

$15,000,000 per person for deaths in 2026, adjusted for inflation starting in 2027. A married couple can protect about $30,000,000 if portability is elected on a timely filed Form 706 at the first death.

Do I pay taxes on an inheritance in California?

Not just for receiving it. You may owe income tax when you withdraw from an inherited IRA or 401(k), capital gains tax if you later sell inherited property for more than its stepped up value, and higher property tax under Prop 19.

Is life insurance taxed when my kids receive it?

A death benefit paid to a named beneficiary is generally not income taxable. It does count toward the federal gross estate if you owned the policy, which only matters for estates over the $15,000,000 line.

Getting it done

Getting the documents in place.

Reading about a will or a trust does not put one in place. If you want an attorney to draft or review your will, living trust, or power of attorney, a LegalShield membership gives you access to a provider law firm for a flat monthly fee instead of an hourly bill. You can also call with a question before it turns into a problem.

See LegalShield plans

Disclosure: Michael Le, the licensed agent behind opfinances.com, is also an independent LegalShield associate and may earn a commission if you enroll. LegalShield is not a law firm; it provides access to legal services offered by independent provider law firms. On Point Finances is not a law firm and does not give legal advice. Plan prices and coverage vary by state.

Where this fits.

This post covers one piece of a bigger plan. Life Insurance walks through the whole decision, and the answer library takes the follow up questions one at a time.

On Point Finances is a licensed insurance agency, not a tax, legal, or investment adviser. This post is general education, not a recommendation, and reading it does not create a client relationship.

Start with a conversation

Sources

• IRS: What's new, estate and gift tax (2026 basic exclusion and annual exclusion)
• IRS: Estate tax filing threshold and portability
• California Revenue and Taxation Code section 13301, prohibition on death and gift taxes
• California Revenue and Taxation Code section 13302, the pick up tax
• California State Board of Equalization: Prop 19 exclusion amount for 2025 to 2027
• UC Law San Francisco ballot archive: Proposition 6 (1982), gift and inheritance taxes

Checked November 1, 2026. Rules and limits change; confirm current figures with the source or your own tax or legal professional before acting.