The tax implications for inheriting property in Santa Clara County, California, will depend on several factors, including the value of the property and your relationship to the deceased.
Estate Tax: The state of California does not have an estate tax, but if the estate is worth more than $11.7 million (for 2021) at the time of the owner’s death, it may be subject to federal estate tax.
Inheritance Tax: California also does not have an inheritance tax, so you will not have to pay state tax on the property you inherit.
Property Tax: When you inherit property, the property’s assessed value may be re-evaluated for property tax purposes, which could result in an increase in property taxes. However, if you are the deceased owner’s spouse, parent, or child, you may be able to avoid a property tax reassessment under certain conditions, such as if you intend to use the property as your primary residence.
Capital Gains Tax: If you sell the inherited property, you may be subject to capital gains tax on any increase in the property’s value since the deceased owner acquired it. However, there are some exceptions and exclusions, such as the step-up in basis rule, which adjusts the property’s basis to its fair market value on the date of the owner’s death, potentially reducing or eliminating capital gains tax liability.
We’re not tax professionals and we recommend you consult with a tax professional or estate planning attorney to fully understand the tax implications of inheriting property in Santa Clara County. However we can help you figure out next steps with your inherited property whether you want to live in it, sell it, rent it out or exchange into another property.