Yes, yes you can!

There are some tax implications for inheriting a home in California, or none if you’re moving into the home as your primary residence.

The process is similar to selling your own home, but with inheriting a residence comes some more tax responsibilities and steps to get that property off your books. Death and taxes, and we just hit ‘em both with this transaction (too dark? Or darkly funny?)

So, let’s look at Chris and Courtney, who inherited Chris’ mom’s house last year. Chris and Courtney are in their 30s, both working professionals and expecting their first child.

They have no time or desire to manage a second home, especially with a newborn on the way, so they turned to the San Diego Home Buyer to sell the house. So, we helped walk them through the process.

Determine the home’s costs

One of the most important steps is determining the costs of the home, along with its value (which we get into later). Naturally, this takes some time as Chris and Courtney have other pressing matters after initially inheriting the home.

But as they moved forward, they evaluated what they wanted to do with the property. So, they examined the home for the financial obligations and any physical damages.

  • Is there a mortgage or home equity loan? Yes, Chris’ mom owed $150,000 on her mortgage. Chris and Courtney, though, are familiar with selling while owing money as they previously sold their condo and upgraded to a single-family home two years ago.
  • Is there a tax lien? No. Chris’ mom was up to date on property taxes and other tax obligations. Big win for Chris and Courtney.
  • Is there property damage? Slightly. Courtney noticed a few things in need of repairs, but nothing too significant. After we buy the house, our in-house construction team will tend to the fixes. Another big win.

Legal Sale Executor

Chris was tapped by his mom as the executor in her Will. He’ll manage the estate until it’s sold, thus meeting all the financial and tax obligations.

Not a fun gig, but Chris works in finance and Courtney is a sole proprietor so they understand numbers.

In California, an executor doesn’t have to be a relative, but must be 18 or older, of “sound mind,” unlikely to mismanage the estate and able to travel frequently to the property’s location.

The long game

Probate can take time. A lot of time. How much? Up to nine months or one year.

Going through probate can be a chore but makes sure your inherited home meets the state’s standards.

Probate manages the following:

  • Verifying if the Will is valid.
  • Determines all heirs and beneficiaries.
  • Calculates the estate’s value.
  • Satisfies remaining financial obligations.
  • Transfers property and assets to heirs.

Proposition 19

In November 2020, voters approved Prop. 19 by 51% and in doing so, changed the landscape for taxes and transfers, including inheritance.

Prop. 19 changed the taxation of family-property transfers. Now, instead of being excluded from reassessment, children who inherit a home or another property that is not their primary residence to receive a new tax bill based on a current market-rate assessment.

Ah, government at its finest.

According to the proposition, the ballot measure eliminates the parent-to-child and grandparent-to-grandchild exemption in cases where the child or grandchild does not use the inherited property as their principal residence, such as using a property as a rental house or a second home. When the inherited property is used as the recipient’s principal residence but is sold for $1 million more than the property’s taxable value, an upward adjustment in assessed value would occur.

The ballot measure also applied these rules to certain farms. Beginning on February 16, 2023, the $1 million amount would be adjusted each year at a rate equal to the change in the California House Price Index.

So, for Chris and Courtney, they are now taxed under the new law. It’s a bummer and they’re not happy about it, but they’ll still be able to pull a nice profit.

Tax obligations

Now that Chris and Courtney have navigated through Prop. 19, next up on the to-do list is to figure out their tax obligations. The couple is researching capital gains and property taxes.

In California, when Chris and Courtney sell their inherited house, they’ll either have a capital gain or loss. To determine a gain or loss, they will use this formula (don’t worry, it’s not too complex): sale price – inherited property value = gain/loss.

Chris’ mom bought the place 20 years ago for $250,000 and today it’s valued at $650,000. However, Chris and Courtney sold to the San Diego Home Buyer for $700,000, so their capital gains is just $50,000.

Quite the bullet dodged, especially since California loves to tax any and everything. Chris and Courtney only are required to pay capital gains between when they inherited the house and when the sold it, which according to the IRS is called “stepped up basis.”

Also, be sure to report the sale on your taxes, even if you don’t have to pay any taxes. No need to get Uncle Sam all riled up. Let that sleeping dog lie.

Prepare for the sale

Since Chris and Courtney went through the San Diego Home Buyer, their experience was much different than others. Of course, the couple cleaned out Chris’ mom’s belongings and cleaned the house.

Once they cleared probate, Chris and Courtney were off and selling. They priced the home and called us. We made an all-cash, fair-market offer they accepted. We conducted the inspection and took care of the repairs Courtney found.

This was a big relief to the couple as they had a ton of other stuff to worry about. Additionally, they opted to forgo using a Realtor and pocketed more cash as commissions and other closing costs were avoided since they chose us.


Our closing is lighting fast, which suits Chris and Courtney perfectly. They did what they needed to in order to get the house ready for a sale, now they want to be done with ASAP.

Since the couple is already familiar with the closing process, and they have the necessary documentation for the home, our process will take a matter of days.

All-cash offers cut out tons of legwork (and since no one likes leg day, why bother?) and gets them their money fast. We close in days, which was another appealing factor for the couple.

Probate and the process of inheritance took months, so Chris and Courtney were not about to engage in a battle royale of negotiations, offers and potentially losing the sale while closing because financing fell through.

With the San Diego Home Buyer, it took days to close, and they became another satisfied client. It’s how we roll.