The Prop 19 Exclusion Is Not One Million Dollars
A modest mid-century Southern California family home at first light
Almost everyone inheriting a California family home has heard there is a $1 million exclusion. There is not. The limit is your parents' factored base year value plus an indexed amount, currently $1,044,586, and whether it covers your property depends on a third number that nobody has written down yet.
Your parents bought the house a long time ago.
Because they bought it a long time ago, their property tax bill bears almost no relationship to what the house is worth today. That gap is the whole point of Proposition 13, and for most California families it is the single largest piece of inherited value that nobody thinks of as value.
Then the house passes to you, and a reasonable question arrives:
Do I keep their property tax bill?
Somebody will tell you there is a million dollar exclusion. That number is close enough to the truth to be repeated everywhere and wrong enough to plan badly around.
Quick Answer
Proposition 19 does not exclude $1 million of value. It excludes your parents' factored base year value plus an indexed amount that the Board of Equalization republishes every two years.
For transfers between 16 February 2025 and 15 February 2027 that indexed amount is $1,044,586.
Whether the exclusion covers your property depends on comparing that limit against the fair market value of the home on the date of transfer.
Two of those three numbers already exist. The third is an appraisal.
The Number Everyone Repeats
Proposition 19 became operative on 16 February 2021. It replaced the older parent-child rules, and the replacement is narrower in two ways that matter.
The first is the principal residence condition. Under the current rules the property must be the principal residence of both the transferor and the transferee. It is not enough that your parents lived there. You have to live there too.
The second is the value limit, and this is where the million dollar figure comes from. The exclusion is capped at the factored base year value plus $1 million, and that million is indexed:
16 February 2021 to 15 February 2023: $1,000,000
16 February 2023 to 15 February 2025: $1,022,600
16 February 2025 to 15 February 2027: $1,044,586
So the phrase "a million dollar exclusion" describes one component of the limit, at one point in a moving series, and leaves out the component that varies most between families.
Three Numbers, and Only One of Them Is Unknown
The arithmetic is not complicated. It is just rarely laid out.
The factored base year value. What your parents' property is assessed at today, after Proposition 13 has held the increases down for however many years they owned it. This is on their tax bill and at the County Assessor.
The indexed exclusion. Currently $1,044,586. Published, and the same for everybody.
The fair market value on the date of transfer. What the property was actually worth on the day it passed. This is the number that has never been written down, and it is the one an appraisal establishes.
Add the first two together and you have the limit. Compare the market value against it. If the market value is under the limit, the exclusion covers the transfer. If it is over, the excess is added to the factored base year value and that becomes the new taxable value.
The Board of Equalization publishes its own worked example. A home with a factored base year value of $300,000 and a fair market value of $1,500,000 has an excluded amount of $1,300,000. The $200,000 difference is added to the factored base year value, giving an adjusted taxable value of $500,000.
That example is theirs and it uses the original $1,000,000 figure. Yours will use your parents' assessment, the indexed amount current on your date, and a market value that has to be established rather than assumed.
What an Appraiser Supplies, and What We Do Not
We establish the fair market value of the property as of the date of transfer, and we document how that conclusion was reached so that a reader who was not there can follow it.
That is the whole of our role, and the boundary is worth stating plainly because this subject invites people over it.
We do not determine whether an exclusion is available to you. We do not calculate your property tax. We do not advise whether to claim, whether to move in, whether to sell or whether to keep. Those questions belong to the County Assessor, to your attorney and to your tax advisor, and an appraiser answering them would be a guess wearing a signature.
What we can do is make sure the number they are all working from is supported rather than estimated, because it is the only one of the three that anybody can get wrong.
The Same Date Produces Two Different Numbers
This is where families most often conflate two things that are not the same.
The date of death produces a value for federal income tax, under Internal Revenue Code section 1014. That is your basis, and it is subtracted from a future sale price to determine gain. Our Studio City inheritance appraisal page takes that question up in detail.
The same date produces a value for California property tax, under Proposition 19. That is the market value compared against the exclusion limit, and it determines what the annual bill becomes.
One date. Two regimes. Two different consequences, neither of which substitutes for the other. A family can be entirely relaxed about one and badly exposed on the other, and the appraisal that supports both is the same appraisal, provided it was developed for a defensible effective date in the first place.
Timing Is a Condition, Not a Courtesy
Two clocks run, and they are shorter than people expect.
A claim for the exclusion must be filed within three years of the date of transfer, or before the property is sold to a third party, whichever comes first.
The homeowners' exemption claim that supports the principal residence condition must be filed within one year of the date of death or transfer.
The practical consequence is not legal, it is evidentiary. A value as of a date years in the past has to be reconstructed from what the record retained, and houses do not sit still while an estate is administered. They get cleared, cleaned, repaired and made ready. Each of those ordinary and sensible acts removes a little of the evidence of how the property stood on the date the value actually attaches to.
Establishing the figure early is easier than establishing it late. That is a statement about evidence, not about urgency.
What to Bring
You do not need a complete set of records before speaking to anyone. Part of the work is establishing what exists and stating clearly what does not.
Where they exist, the useful items are:
- the most recent property tax bill, which carries the factored base year value
- the date of death or the date of transfer, confirmed with your attorney
- the deed or trust instrument governing how the property passed
- any documentation of improvements made during your parents' ownership
- permits and approvals for work that was done
- whatever photographs exist of the property near the effective date
That last one matters more than it sounds. For a retrospective value, a family's ordinary photographs are frequently the best surviving evidence of condition.
The Better Question
So, does the exclusion cover my parents' house?
That question cannot be answered responsibly without the third number, and the third number is not a matter of opinion.
A better one is:
"What was this property actually worth on the date it passed, and can that figure be supported if the Assessor asks?"
That is a question an appraisal can answer, and it is the question every other decision here rests on.
The exclusion is arithmetic. Two of the inputs are already published. The third is the one worth getting right.
Frequently Asked Questions
Does putting the house in a revocable living trust avoid Proposition 19?
No. A revocable living trust governs how property passes, not whether a transfer is a change in ownership for property tax purposes. This is one of the most common misunderstandings in this area and it is worth confirming your position with your attorney rather than assuming.
Do I have to live in the house to keep my parents' assessment?
The current rules require the property to be the principal residence of both the transferor and the transferee. Whether your circumstances satisfy that is a question for the County Assessor and your advisor, not for an appraiser.
Is the exclusion really $1,044,586?
That is the indexed amount for transfers between 16 February 2025 and 15 February 2027. It is added to your parents' factored base year value to produce the limit, so the limit itself is different for every family.
Can an appraisal guarantee I keep the lower assessment?
No, and any appraiser who suggests otherwise is overselling. An appraisal establishes a supported market value as of the effective date. Whether an exclusion applies is determined elsewhere.
Is this the same as the stepped-up basis I have heard about?
No. That is federal income tax under Internal Revenue Code section 1014 and it affects what you owe if you sell. Proposition 19 is California property tax and it affects the annual bill. They share a date and nothing else.
Establish the Number While It Is Still Easy
West Coast Evaluation provides independent residential appraisal services for heirs, trustees, executors and the attorneys and advisors working with them. We establish a supported value as of the date that governs, and we say plainly what the report does and does not decide.
North Hollywood Inheritance Appraisal
