Inheritance Tax in California: What It Is (And Isn’t)
Learn about inheritance tax in California, including what matters and a short history of how we get where we are in the state.
Inheritance tax in California confuses a lot of people. Here’s the simple version: there is none today. If you receive money or property from someone who lived the state, you don’t owe a separate state tax on your inheritance. That said, other rules still matter—especially if the person who passed lived in a state that does have an inheritance tax.
No. California repealed its inheritance tax in 1982 through Proposition 6, and the measure also barred the state and local governments from imposing inheritance taxes going forward. California kept only a “pick-up” estate tax tied to a federal credit, which later phased out. As a result, inheritances received from someone who lived in California aren’t taxed by the state.
A Short History of Estate Tax in California
- Before 1982: California imposed inheritance and gift taxes.
- June 8, 1982: Voters approved Proposition 6, repealing those taxes and prohibiting state and local inheritance taxes. The measure also created a pick-up estate tax that only applied to the extent a federal credit was available.
- 2001–2005: Federal law (EGTRRA) phased out the state death tax credit that California’s pick-up depended on, rendering the state’s estate tax inoperative for those passing after January 1, 2005. This didn’t change the rule on inheritance tax in California—it had already been repealed in 1982.
What Still Matters If You Inherit
Even though there’s no inheritance tax in California, a few key points are worth keeping on your radar:
- Out-of-state exposure: A handful of states levy an inheritance tax (for example, Maryland, Nebraska, New Jersey, Kentucky, and Pennsylvania). If the person who passed lived in one of those states—or owned property there—you might owe that other state’s inheritance tax even if you live in California.
- No federal inheritance tax: The federal government does not impose an inheritance tax. It imposes an estate tax, which is charged to the estate itself if the taxable amount exceeds the federal exclusion. For 2025, that exclusion is $13.99 million per person. Most estates fall below this level.
- Property location matters: If you inherit real estate that’s located in a state with an inheritance tax, that state’s rules could apply regardless of where you live. Check the situs (location) of the property, not just the former residence of the person who passed.
Common Misconceptions About Inheritance Tax in California
- “California taxes inheritances.” False. The state does not tax inheritances and hasn’t since 1982.
- “If the estate pays federal tax, I’ll also owe state tax.” No. Federal estate tax and state inheritance tax are different concepts; California doesn’t add an additional layer.
- “The old California pick-up tax still applies.” That mechanism depended on a federal credit that ended in 2005, so it no longer produces a state levy.
Practical Planning Focus (Not Legal Advice)
Because there’s no extra tax, planning often centers on other goals: organizing assets, streamlining transfers, and keeping beneficiary designations current so assets pass smoothly. If you might receive property from someone in a state with inheritance tax, it’s smart to understand that state’s thresholds, rates, and exemptions for close relatives vs. others—those rules differ widely. A quick high-level scan from reputable consumer resources (AARP and Nolo) helps you see whether another state’s law could apply.
Why This History Still Matters
The backstory prevents confusion. You may still encounter references to an extra tax in older materials. Those are historical. Since Proposition 6 (1982), the state has prohibited inheritance taxes, and later federal changes made the state’s old pick-up estate tax inoperative. Today’s rule is straightforward: there’s no inheritance tax in California.
(Learn More: Read about revocable trusts in California versus Nevada.)