Quick Answer
- Inheritance itself doesn’t create a federal property tax, but it can trigger a local property tax reassessment, change exemptions, and shift billing responsibility.
- In many states, a transfer at death is treated as a “change in ownership”, which may reset the property’s assessed value to current market value.
- You’ll likely need to file forms with the county assessor within strict deadlines to keep or apply exemptions (like a homestead) and avoid penalties.
- If you plan to sell, remember that property taxes and capital gains taxes are different—you often get a step-up in basis for income tax purposes, but your annual property tax bill may still change based on reassessment.
- For a smooth process, our Inherited Property Real Estate advisors recommend documenting title, confirming exemptions, and appealing assessments when warranted.
Why Inheriting Property Can Change Your Tax Picture
When a loved one passes and you inherit a home or investment property, your annual property tax situation can shift in several ways:
- Reassessment risk: Many states reassess a property to fair market value when ownership changes due to death, which can increase (or sometimes decrease) the tax bill.
- Exemptions update: A decedent’s homestead or senior exemption does not automatically carry over. You must reapply, and some exemptions are only for owner-occupants.
- Billing & responsibility: The estate or new owner becomes responsible for current and delinquent taxes. Liens follow the property, not the person.
- Filing deadlines: Assessors often require a Change in Ownership Statement or similar form within a set timeframe (e.g., 30–150 days), with penalties for late filing.
Because rules differ widely by jurisdiction, our Inherited Property Real Estate advisors recommend confirming your local assessor’s requirements within days of inheritance to preserve benefits and prevent avoidable tax spikes.
Common Scenarios That Affect Property Taxes After Inheritance
- Parent-to-child transfers: Some states provide limited exclusions or caps to reduce reassessment on family transfers, but many have narrowed these benefits. For example, certain jurisdictions limit parent-child exclusions to a primary residence with conditions or dollar caps.
- Spousal transfers: Surviving spouses often receive the least disruptive treatment, with more generous exemptions or non-reassessment in many areas.
- Multiple heirs: Co-ownership can complicate homestead eligibility—usually only one heir living in the property can claim it as a primary residence.
- Trusts and transfer-on-death deeds: If property passes through a revocable living trust or a transfer-on-death instrument, it may still be a change in ownership for property tax purposes unless a local exception applies.
- LLC or entity ownership: Moving inherited property into an entity can trigger reassessment in some states, even if members are the same people.
Given the nuance, our Inherited Property Real Estate advisors recommend modeling different title and occupancy options before recording deeds.
Exemptions You May Need to Reapply For
- Homestead exemption: Typically lowers assessed value for owner-occupants; must be newly filed by the heir who will live there.
- Senior/disabled/veterans exemptions: If eligible, these can materially reduce taxes—often require fresh applications by the new owner.
- Agricultural or conservation use: Heirs must re-certify active use and meet strict rules, or roll-back taxes can apply.
- Assessment caps and “portability”: Some states cap annual assessment increases for homesteads and allow limited portability. Caps can reset at inheritance unless you qualify and file on time.
To preserve savings, our Inherited Property Real Estate advisors recommend calendaring exemption deadlines immediately after probate or deed transfer.
What Documents and Filings to Prepare
- Certified death certificate
- Proof of authority (e.g., letters testamentary, court order, or trustee certification)
- Recorded deed transferring title (executor’s deed, trustee’s deed, or affidavit of heirship where allowed)
- Jurisdiction-specific Change in Ownership Statement or equivalent assessor form
- Applications for homestead and other exemptions
- Supporting valuation evidence if you plan to appeal (appraisal, comps, condition reports)
Submitting the right forms promptly helps avoid penalties and unintended reassessment.
Valuation, Appeals, and Timing
If the assessor’s new value seems high, you usually have a short window (often 30–90 days from the notice) to appeal:
- Get a date-of-death appraisal: It anchors both property tax appeals and future capital gains calculations.
- Document condition: Photos and contractor estimates for deferred maintenance can justify a lower assessed value.
- Use comps intelligently: Focus on similar properties near the valuation date, adjusting for condition, size, and location.
Appeals succeed most when they’re precise and timely. Our Inherited Property Real Estate advisors recommend pairing a USPAP-compliant appraisal with a concise, evidence-based appeal.
Keeping vs. Selling: Different Tax Considerations
- If you keep and live in the home:
- Reapply for the homestead and any other applicable exemptions.
- Expect a possible assessment reset unless your state offers specific inheritance protections.
- Budget for taxes in escrow or pay plans if the bill increases.
- If you keep as a rental:
- You’ll lose the homestead but may deduct property taxes as an expense on rental income.
- Check local rental registration rules that can affect assessments or fees.
- If you plan to sell:
- Property taxes continue until closing; prorations will be handled in the settlement statement.
- For income tax, many heirs receive a step-up in basis to the fair market value at death, potentially reducing capital gains on sale. This is separate from and does not prevent property tax reassessment.
Because sale timing, repairs, and market conditions affect both tax outcomes and proceeds, our Inherited Property Real Estate advisors recommend a coordinated plan with your tax professional and listing strategy.
Frequent Mistakes to Avoid
- Missing the change-of-ownership filing deadline with the assessor
- Assuming the decedent’s homestead/senior exemption automatically continues
- Overlooking delinquent taxes or liens that reduce net proceeds
- Transferring into an LLC or trust without modeling reassessment impact
- Ignoring a high assessment notice until the appeal window closes
- Skipping a date-of-death appraisal, which is valuable for both appeals and future tax reporting
Simple Action Plan
- Notify the county assessor and request required forms.
- Order a date-of-death appraisal.
- Record the transfer deed or court order establishing title.
- File the change of ownership form and apply for exemptions.
- Review the assessment notice and appeal if warranted.
- Decide whether to occupy, rent, or sell, and align your tax strategy accordingly.
- Keep a document trail for the estate, heirs, and your CPA.
FAQs
- Does death always trigger reassessment?
Not always. Many states do, but there are exceptions (especially for spouses) and limited exclusions in some jurisdictions. Check your local law. - Can multiple heirs claim a homestead?
Generally, only the heir who uses the property as a primary residence can claim a homestead exemption. - What if property taxes were already delinquent?
Liens follow the property. You’ll need to address them to avoid tax sale risk. Payment plans may be available.
Get Help from Inherited Property Advisors
Navigating post-inheritance property taxes is highly local and deadline-driven. Our Inherited Property Real Estate advisors recommend acting quickly, documenting value, and filing the right forms to protect your position. Inherited Property Advisors can help you:
- Confirm jurisdiction-specific reassessment and exemption rules
- Coordinate appraisals, filings, and timely appeals
- Model scenarios for occupy vs. rent vs. sell to optimize outcomes
Contact Inherited Property Advisors today for a streamlined, compliant plan tailored to your inherited property.