Estate Tax in California: A Clear, Current Overview
Explore estate tax in California: the landscape and key strategies to manage your estate effectively, while adhering to federal tax requirements.
Estate tax in California is simpler than you might think. The state does not impose its own estate or inheritance tax today. Most residents only need to consider the federal rules—and even then, only larger estates are affected. Below is a concise guide to how it works now, plus a quick history so you know how we got here.
No. There’s no separate estate tax in California. If someone who lived in California passes, the only potential transfer tax is federal. For 2025, the federal basic exclusion amount is $13.99 million per person (roughly double for married couples using portability). Estates below that threshold owe no federal estate tax; estates above it may owe up to 40% on the amount over the exemption. Most Californians won’t owe federal estate tax, and there’s no additional state layer.
A Short History of Estate Tax in California
Understanding today’s rules is easier with a quick timeline:
- Before 1982: California had gift and inheritance taxes.
- June 8, 1982: Voters approved Propositions 5 and 6, repealing state gift and inheritance taxes and installing a “pick-up” estate tax that simply “picked up” a credit allowed under federal law. In effect, paying California’s pick-up tax didn’t increase the total burden; it shifted a portion of federal tax to the state.
- 2001–2005: Congress passed EGTRRA (2001), which phased out the federal state death tax credit over four years, eliminating it entirely on January 1, 2005. Because California’s estate tax was tied to that federal credit, the tax effectively went to zero for those passing on or after 2005.
That’s why there’s no operative estate tax in California today: the legal mechanism that once generated it disappeared with the federal credit. (If you’re curious about the pick-up concept itself, here’s a plain-English explainer.)
Federal Rules That Matter to Californians
Even without a state levy, federal rules still shape planning for estates in California:
- Exemption amount (2025): $13,990,000 per person.
- What’s taxed: The federal estate tax applies to the taxable estate (gross estate minus deductions like mortgages, administration costs, and transfers to a U.S.-citizen spouse or qualified charities).
- Portability: A surviving spouse can generally “port” any unused exclusion, effectively doubling what a couple can transfer free of federal estate tax. (Commonly covered in federal guidance and consumer primers.)
Because there’s no separate estate tax in California, planning here often focuses on avoiding probate, organizing assets, and using trusts for control and privacy—while keeping an eye on the federal threshold.
Common Misconceptions About Estate Tax in California
- “California taxes inheritances.” False. California has no inheritance tax; a few other states do, but California isn’t one of them.
- “My estate will be taxed just because it’s in California.” Not under current law. Only the federal estate tax could apply, and only if your taxable estate exceeds the federal exclusion.
- “The old law still applies.” It doesn’t. The state’s estate tax was a pick-up tied to a federal credit that ended in 2005.
Why This History Still Matters
Knowing the backstory helps you spot outdated advice. If you see references to a California estate or inheritance tax for current estates, they’re either pre-2005 or discussing proposed (not enacted) measures. The operative rule today is straightforward: no state-level estate tax in California; only the federal framework applies above the exclusion.
(Learn More: Read about revocable trusts in California versus Nevada.)