Questions sellers ask What will the property tax be if I inherit my parents' Palo Alto house?

Why the answer is a number and not a rule

Proposition 19 is usually explained as a yes or no: the family home is excluded from reassessment, or it is not. That framing is what leaves people surprised, because the exclusion is capped, and on a Palo Alto house the cap is small relative to the house. What matters is not whether it applies. It is how much of the increase it removes.

So here is the whole calculation on one house, with every input stated.

The house

The assessed value. Proposition 13 caps the annual increase in assessed value at 2%.¹ Forty-eight years of that on $180,000 gives roughly $466,000 — which is why a long-held Palo Alto house is assessed at a ninth of what it is worth. Your parents’ actual figure is printed on their tax bill and is the number to use; this is the arithmetic, not a guess about their house.

The rate. 1.201% is the total rate on a recent Palo Alto parcel, including the voter-approved bonds that sit on top of the 1% base. It varies by parcel and by year.

Their bill today: $466,000 × 1.201% = about $5,600 a year.

Case one — the child moves in

This is the good outcome, and it has conditions that catch people. To claim the family-home exclusion the child must make it their own principal residence, file for the homeowners’ or disabled veterans’ exemption within a year of the transfer, and file the exclusion claim within three years.²

The exclusion is not the whole house. It covers the parents’ assessed value plus $1,044,586 — a figure the Board of Equalization recalculates every two years, in effect since February 16, 2025 and next adjusting on February 16, 2027.³

Because $4,000,000 is more than $466,000 + $1,044,586, the exclusion is partial, and the new assessment is the market value less the excluded amount:

$4,000,000 − $1,044,586 = $2,955,414

New bill: $2,955,414 × 1.201% = about $35,500 a year.

That is roughly six times what the parents were paying, after doing everything correctly and on time.

Case two — the child does not move in

There is no partial credit and no reduced version. Proposition 19 “contains no exclusion for the transfer of any property other than a family home or family farm,“⁴ and a family home is one the child actually lives in. Without it, the house is reassessed at market value:

New bill: $4,000,000 × 1.201% = about $48,000 a year.

A qualifying home later converted to a rental loses the exclusion it was granted. So the plan of moving in to secure the exclusion and renting it out afterwards does not work, and it is a common plan.

What the exclusion is actually worth

The exclusion saves about $12,500 a year. Set against a $42,400 increase, it removes roughly thirty percent of it.

That is worth having and worth filing for. It is not what the phrase “excluded from reassessment” sounds like, and the gap between those two things is where families make a decision they later regret.

The decision this actually changes

Most families arrive at this question having already decided to keep the house, and treat the tax as a detail to be handled afterwards. Run the other way round, it is the largest recurring number in the plan.

If nobody is going to live in it, holding it costs roughly $48,000 a year in property tax before insurance, maintenance, or the fact that an empty house is often not covered by the policy that covered it while it was lived in. On a house producing no income, that is the cost of the decision, and it compounds with every year of not deciding.

If one sibling will live in it and others will not, the exclusion belongs to the one who moves in — which makes the tax saving part of what is being divided. See how to split a house between siblings.

If it will be sold, the property tax barely matters and the cost basis matters enormously, which is the opposite of what most people assume. See sell before or after.

What to do with this

Find the assessed value on the most recent tax bill and put your own numbers through the three lines above. It takes five minutes and it is usually the first time the decision has a number attached to it.

Then take it to an estate attorney and a CPA, because whether a particular transfer or deed form triggers reassessment now, later, or not at all is a question for them and for the county assessor.⁵ What Maggie can tell you is the other half: what the house would realistically sell for today, what preparation it would need, and how those answers change if the sale happens in two years instead of this spring.

---

Sources. ¹ California BOE, Proposition 13 · ² ⁵ Santa Clara County Assessor, parent-to-child transfers · ³ California BOE News Release 25-02 · ⁴ BOE Publication 800-1, Proposition 19

Figures current at September 27, 2026 and rounded to the nearest hundred. The Proposition 19 exclusion amount changes on February 16, 2027. Tax rates vary by parcel. This is general information about how the rules work, not advice about your family’s property.