Not on the inheritance itself: California taxes neither the estate nor the beneficiaryNo state estate, inheritance, or gift tax; prohibited by Cal. Rev. & Tax. Code § 13301 (voter Prop 6, 1982). California Estate Tax Return no longer required for decedents dying on/after Jan. 1, 2005 (CA State Controller's Office).Verified Sep 15, 2026View source, and the IRS does not treat an inheritance as income. What an heir can owe is income tax on withdrawals from an inherited retirement account, and capital gains on a later sale of inherited property, where the basis is reset to fair market value on the date of death26 USC § 1014Verified Sep 15, 2026View source and the gain faces ordinary income tax at the state's regular ratesCal. Rev. & Tax. Code § 17041(a), (e), (h) — rate schedule; estates/trusts taxed at individual rates; annual bracket indexingVerified Sep 15, 2026View source.

No. The IRS does not treat inherited money, real estate or personal items as income, so a beneficiary in California does not report them on a federal return when received. Two exceptions: an inherited retirement account (a 401(k) or a traditional IRA) is taxed as ordinary income as it is withdrawn, and earnings after the date of death are taxable. Inherited property takes a stepped-up basis, its value on the date of death, for any later capital gain.

When someone dies, the cost basis of the property they leave is reset to its fair market value on the date of death26 USC § 1014Verified Sep 15, 2026View source under IRC § 1014. A later sale is taxed on the gain above that stepped-up basis, not above what the original owner paid, so the appreciation of the owner's lifetime is never taxed. The rule is federal and applies in California as in every state.

California intestacy law decides. As a community property stateCal. Prob. Code § 6401Verified Sep 10, 2026View source, California distinguishes community property (acquired during the marriage) from separate property (owned before it, or received as a gift or inheritance), and the surviving spouse's share differs for each. The estate passes to the closest surviving relatives, in most cases the spouse and children first, then in order: Parents; Issue of the parents; Grandparents and their issue; Issue of a predeceased spouse; Next of kin; Parents of a predeceased spouse and their issue; The State of CaliforniaCal. Prob. Code § 6401Verified Sep 10, 2026View source.