Does California Have an Estate or Inheritance Tax? (2026) And What Actually Costs Families at Death

Quick answer: does California have an estate tax or an inheritance tax?

Short answer: No. California has no estate tax, inheritance tax, or gift tax. Voters repealed the inheritance and gift taxes in June 1982, and no California estate tax return is required for deaths on or after January 1, 2005. Very large estates may owe federal estate tax; the 2026 basic exclusion is $15,000,000 per person.

No. California does not have an estate tax, an inheritance tax, or a gift tax for deaths and gifts today. California voters repealed the state's inheritance and gift taxes in June 1982 (Proposition 6). The state's remaining estate tax was a "pick-up" tax tied to a federal credit for state death taxes. That federal credit was phased out and eliminated as of January 1, 2005, and the State Controller's Office states that for deaths on or after that date, there is no longer a requirement to file a California estate tax return.

That does not mean nothing is owed when someone dies. The costs families more often run into are federal estate tax for very large estates, income tax on inherited retirement accounts, property tax reassessment under Prop 19, and probate, if assets were not set up to pass outside of court.

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Why doesn't California have an inheritance or gift tax?

The State Controller's Office (SCO), which administers California's estate, inheritance, and gift tax programs, explains the current status:

• Inheritance tax is collected only for decedents who died before June 8, 1982.
• Gift tax is collected only for gifts made before June 8, 1982.
• Estate tax: for deaths on or after June 8, 1982 and before January 1, 2005, a California estate tax return was required only if a federal estate tax return was filed. For deaths on or after January 1, 2005, there is no longer a requirement to file one, because the federal state death tax credit was eliminated.

The June 8, 1982 date comes from Proposition 6, an initiative whose basic purpose, according to a 1982 California Attorney General opinion, was to repeal California's gift and inheritance taxes. The current statute, Revenue and Taxation Code §13301, prohibits the state and local governments from imposing gift, inheritance, or estate taxes, apart from the pick-up tax in §13302 that depended on the now-eliminated federal credit.

What is the federal estate tax exemption in 2026?

For people who die in 2026, the federal basic exclusion amount is $15,000,000, according to the IRS. The increase comes from Public Law 119-21, signed July 4, 2025 (the IRS refers to it as the One, Big, Beautiful Bill Act in Revenue Procedure 2025-32 and as the Working Families Tax Cuts legislation on its estate and gift tax page). The IRS states the amount will be adjusted for inflation for 2027 and later years.

What that means in practice:

• Most California estates are far below this level and owe no federal estate tax.
• The exclusion is shared between lifetime taxable gifts and the estate at death.
• Married couples: a surviving spouse's estate may use a deceased spouse's unused exclusion ("portability"), but only if the executor elects it on a timely filed federal estate tax return (Form 706) for the first spouse, even when no tax is owed. Ask a CPA whether that filing makes sense for your family.

Does California tax gifts, and what is the federal gift tax annual exclusion?

California does not tax gifts made today. At the federal level, the IRS annual exclusion for gifts is $19,000 per recipient for 2026. The IRS says gifts that are not more than the annual exclusion are generally not taxable gifts, and that tuition or medical expenses paid for someone, and gifts to a spouse, have their own exceptions. Larger gifts can count toward the lifetime basic exclusion and may involve a federal gift tax return (Form 709). A tax professional can confirm how this applies to your gifts.

Do I pay California tax on money I inherit?

Generally not on the inheritance itself. The Franchise Tax Board says that if you receive a gift or inheritance, do not include it in your income. If the inheritance later produces income, such as interest, dividends, rent, pension income, or gain on the sale of real property, that income is taxable.

Inherited retirement accounts are the big exception in practice. Money withdrawn from an inherited traditional IRA is generally taxable income to the beneficiary when it comes out.

How are inherited IRAs taxed (the 10-year rule)?

For IRA owners who died after 2019, IRS Publication 590-B explains that many beneficiaries must withdraw the entire account by December 31 of the year containing the 10th anniversary of the owner's death. Key points, kept general:

• Eligible designated beneficiaries can have different options, including life expectancy payments. Pub. 590-B lists them as the owner's surviving spouse, the owner's minor child, a disabled individual, a chronically ill individual, or any other individual not more than 10 years younger than the owner.
• Other individual beneficiaries generally fall under the 10-year rule. Depending on whether the owner had reached the required beginning date, annual distributions may also be required during the 10 years.
• Beneficiaries of a traditional IRA must include taxable distributions in their gross income.
• Other retirement plans, such as 401(k)s, follow their own plan rules. Check with the plan administrator.

When to take withdrawals, and how much, is a tax planning question. Talk with a CPA or tax professional before taking money out of an inherited account.

Do I pay income tax when I sell an inherited house (step-up in basis)?

Possibly, but often less than people expect. Under federal law (Internal Revenue Code §1014), the basis of property inherited from a decedent is generally its fair market value on the date of death (or an alternate valuation date if the estate elects it). This is often called a "step-up" in basis. If you sell soon after inheriting, gain is measured from that date-of-death value, not from what your parent originally paid.

Community property: California is a community property state. IRS Publication 551 explains that when one spouse dies, the total value of the community property, including the surviving spouse's half, generally becomes the basis of the entire property, as long as at least half of the community interest is includible in the decedent's gross estate (IRC §1014(b)(6)). How property is titled and characterized matters, so ask a CPA and an attorney to review your situation. Nothing here promises a particular tax result.

Does inheriting a home raise the property tax?

It can. A transfer at death is generally a change in ownership for property tax purposes. Under Proposition 19, a child may keep a parent's lower taxable value on a family home only if the child makes it their principal residence and files the required claims, and only up to a value cap (the factored base year value plus $1,044,586 for transfers from February 16, 2025 through February 15, 2027, per the BOE). Rentals and second homes no longer qualify. See our Prop 19 parent-child exclusion guide, and contact your county assessor with reassessment questions.

What if my parent lived in, or owned property in, another state?

California's lack of an inheritance tax does not control what other states do. Some states impose their own inheritance or estate taxes. If a parent lived outside California or owned real estate in another state, ask a tax professional in that state, or a CPA familiar with multistate estates, whether that state's tax applies.

Does a living trust lower estate taxes?

For most families, tax savings are not the reason to have one. A revocable living trust is mainly a probate and incapacity planning tool, and you should not count on it to reduce taxes. Ask your CPA how a trust fits your situation. Its value is practical:

• A properly funded trust may help avoid probate for the assets titled in it. Probate is a court process and can involve delay.
• It lets a successor trustee manage trust assets if you become incapacitated.
• It keeps your instructions for beneficiaries in one place.

Families with estates near the federal exclusion, or with complex assets, may need tax planning beyond a basic trust. That is a conversation for a CPA or tax professional together with your attorney. See living trust vs. will, how to fund a living trust, our AB 2016 home petition guide, and our guide to Medi-Cal estate recovery, another cost some families face after a death.

When should a CPA be involved?

Bring in a CPA or tax professional when:

• Someone inherits a retirement account and needs a withdrawal plan.
• An heir plans to sell inherited property and needs to document basis.
• A surviving spouse is considering a portability election (Form 706).
• Lifetime gifts above the annual exclusion have been made, or are planned.
• The estate may be close to the federal exclusion, or a parent lived or owned property in another state.
• A trust or estate has income and may need its own returns.

How can CBM help?

CBM Estate & Trust Law helps California families put a funded revocable trust and related documents in place, which for most families addresses probate and incapacity rather than taxes. Higher-net-worth and tax questions are a topic for a consultation and for your CPA or tax professional; CBM does not provide tax advice. Carmen B. Marquez has practiced estate planning since 2001, and the firm was founded in 2012. Carmen speaks Spanish. Learn more on our estate planning and trust funding pages. CBM does not offer probate services.

General information, not tax advice. Talk to a CPA or tax professional about your situation.

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Related guides

• TOD deed vs. living trust in California
• AB 2016 $750,000 home petition vs. a living trust
• Medicare vs. Medi-Cal for nursing home care
• Trust funding
• Trust administration
• Estate planning glossary

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Frequently asked questions

Does California have an inheritance tax in 2026?

No. California's inheritance tax applies only to people who died before June 8, 1982, according to the State Controller's Office. There is also no California estate tax return requirement for deaths on or after January 1, 2005.

Do I pay California tax on money I inherit?

Generally not on the inheritance itself. The Franchise Tax Board says not to include a gift or inheritance in your income. Income the inheritance later earns, such as interest, rent, or gain on a sale, is taxable. Withdrawals from an inherited traditional IRA are generally taxable income.

What is the federal estate tax exemption in 2026?

The IRS states the basic exclusion amount is $15,000,000 for people who die in 2026. It is scheduled to be adjusted for inflation starting in 2027. Most estates owe no federal estate tax.

Does California tax gifts?

No. California's gift tax applies only to gifts made before June 8, 1982. Federally, the 2026 annual gift exclusion is $19,000 per recipient; larger gifts can count toward the lifetime exclusion and may involve a federal gift tax return.

Does a living trust lower estate taxes?

Tax savings are generally not the reason to have a revocable living trust, and you should not count on one to reduce taxes. Its main benefits are that a funded trust may help avoid probate and that a successor trustee can step in if you become incapacitated.

Do I pay income tax when I sell an inherited house?

It depends. The basis of inherited property is generally its fair market value at the date of death, so gain is usually measured from that value. For community property, both halves may receive a new basis when the first spouse dies, if IRS requirements are met. Ask a CPA about your sale.

What if my parent lived in another state?

That state's rules may apply. Some states have their own inheritance or estate taxes, and California's lack of one does not change that. Ask a tax professional familiar with that state.

Do I need tax planning or just a trust?

Many families mainly need a funded trust for probate and incapacity planning. Book a free 60-minute consultation with CBM to talk through your plan, and bring tax questions to your CPA. /contact · (805) 915-4793 · Trusts@cbm.estate

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What sources does this guide rely on?

• California State Controller's Office, California Estate Tax (estate, inheritance, and gift tax status).
• Revenue and Taxation Code §13301 and §13302 (Proposition 6, June 8, 1982).
• California Attorney General, Opinion No. 82-1003 (effective date and purpose of Proposition 6).
• Franchise Tax Board, Gifts and inheritance.
• IRS, What's new, estate and gift tax; IR-2025-103, 2026 inflation adjustments; Revenue Procedure 2025-32; Estate tax (portability).
• IRS, Publication 590-B (inherited IRAs, 10-year rule).
• IRS, Publication 551 (basis of inherited and community property); 26 U.S.C. §1014.
• BOE, Proposition 19 and Letter To Assessors No. 2025/009.

Next step

Most California families do not face an estate tax, but they can still face probate, incapacity, and property tax questions. A funded trust and a clear plan can make things simpler for the people you leave in charge.

Book a free 60-minute consultation · /contact · (805) 915-4793 · Trusts@cbm.estate

Planning: Estate planning · Trust funding · Related: Prop 19 parent-child exclusion

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Attorney advertising. This guide is general educational information as of the date above. It is not legal or tax advice, does not create an attorney-client relationship, and may not reflect later changes in law or agency guidance. Consult an attorney and a CPA or tax professional about your situation. Results depend on your facts; no outcome is guaranteed. CBM Estate & Trust Law (Carmen B. Marquez, P.C.) practices in California only.