If you are searching for how much is California inheritance tax, the answer is clear and reassuring for most families: California does not charge an inheritance tax. Heirs who receive money, property, or other assets from someone who lived and died in California do not pay a state tax simply for inheriting those assets. This rule applies regardless of the size of the inheritance or the relationship between the deceased and the beneficiary.
Even though the state does not impose an inheritance tax, understanding the full tax picture is still essential. Federal estate taxes, property tax rules, and income taxes on future earnings can all affect the value of what beneficiaries ultimately keep. This guide explains the current, confirmed rules as they stand today and what they mean for U.S. residents, with a focus on California.
What Is an Inheritance Tax?
An inheritance tax is a state-level tax charged to the person who receives assets from an estate. It is different from an estate tax, which is paid by the estate itself before assets are distributed.
In the United States, only a small number of states still impose an inheritance tax. California is not one of them. That means:
- Beneficiaries do not pay a percentage of their inheritance to the State of California.
- The value of the inheritance does not change the rule.
- Relationship to the deceased does not change the rule.
Whether you inherit a modest savings account or a multi-million-dollar property, California does not assess an inheritance tax.
Does California Have an Estate Tax?
No. California also does not have a state-level estate tax.
Some states tax large estates before distribution. California repealed its estate tax system years ago and has not reinstated it. As of today, there is:
- No California inheritance tax
- No California estate tax
This places California among the majority of states that do not tax wealth transfers at the state level.
The Role of Federal Estate Tax
While California does not tax inheritances, the federal government may tax very large estates.
In 2026, the federal estate tax exemption stands at:
- $15 million per individual
- $30 million for married couples who use proper estate planning
Only the portion of an estate that exceeds these thresholds is subject to federal estate tax. The top federal estate tax rate remains 40 percent on the amount above the exemption.
Key points to understand:
- The tax is paid by the estate, not by the heirs directly.
- Most estates in the United States fall well below the exemption and owe no federal estate tax.
- If federal estate tax is due, it reduces the amount distributed to beneficiaries, even though California does not add any state-level tax.
So when people ask how much is California inheritance tax, the state answer is zero, but very large estates may still be reduced by federal taxes before heirs receive their share.
Are Inheritances Considered Income?
In California and under federal law, inherited assets are not treated as taxable income at the moment they are received. This includes:
- Cash
- Bank accounts
- Investment portfolios
- Real estate
- Personal property
You do not report the value of the inheritance itself as income on your tax return.
However, income generated by inherited assets is taxable. Examples include:
- Interest earned on inherited savings
- Dividends from inherited stocks
- Rental income from inherited property
- Business income from an inherited enterprise
That income is subject to normal federal and California income tax rules.
What About Capital Gains on Inherited Property?
Inherited assets typically receive a step-up in cost basis to their fair market value at the date of death. This can significantly reduce capital gains tax if the asset is later sold.
For example:
- If a parent bought a home for $200,000 and it is worth $1 million at death, the heir’s cost basis becomes $1 million.
- If the heir sells the home shortly after inheriting it for $1 million, there is usually no capital gain.
- If the heir later sells it for $1.1 million, capital gains tax applies only to the $100,000 increase.
This rule often provides a major tax benefit to heirs and is separate from inheritance or estate taxes.
Inheriting Property in California and Property Taxes
Even though there is no inheritance tax, California property taxes can change when real estate is transferred through inheritance.
Under current law:
- Inherited property is generally reassessed at its current market value.
- This can increase the annual property tax bill for heirs.
- Certain transfers between parents and children may qualify for limited exclusions if specific conditions are met.
This reassessment does not mean a tax is charged on the inheritance itself, but it can raise the ongoing cost of owning inherited real estate.
What If the Deceased Lived in Another State?
If you live in California but inherit from someone who lived in a state that has an inheritance tax, that other state’s law may apply.
In such cases:
- The inheritance may be subject to that state’s inheritance tax.
- The tax is typically based on the heir’s relationship to the deceased and the value of the assets.
- California does not add its own inheritance tax on top of that.
So the location and legal residence of the deceased can matter, even if the heir lives in California.
Common Myths About California Inheritance Taxes
Myth 1: Large Inheritances Are Taxed by the State
False. No matter how large the inheritance, California does not impose an inheritance tax.
Myth 2: Children Pay a Special Tax on Inherited Homes
False. Children may face higher property taxes due to reassessment, but they do not pay an inheritance tax.
Myth 3: Cash Inheritances Are Treated as Income
False. The inheritance itself is not income. Only future earnings from that cash are taxable.
Planning Considerations for California Families
Even with no state inheritance tax, thoughtful planning remains important.
Federal Estate Planning
High-net-worth individuals should monitor federal exemption levels and plan accordingly with trusts, gifting strategies, and spousal planning tools.
Property Tax Planning
Families who expect to pass on real estate should understand how reassessment rules work and how they may affect heirs’ long-term costs.
Beneficiary Designations
Keeping retirement accounts, life insurance, and payable-on-death accounts up to date ensures smooth transfer and avoids unnecessary delays or legal complications.
The Bottom Line
For those asking how much is California inheritance tax, the confirmed answer today is simple: there is none. California does not tax inheritances, and it does not impose a state estate tax either. Most heirs receive their assets without paying any state-level transfer tax.
However, very large estates may still face federal estate tax, and inherited property can lead to higher property taxes and future income tax obligations. Understanding these distinctions helps families plan realistically and avoid confusion at an already difficult time.
Stay informed, and feel free to share your thoughts or questions in the comments to keep the conversation going.