31. What You Need to Know About Property Taxes on Inherited Homes

31. What You Need to Know About Property Taxes on Inherited Homes gives you a clear, step-by-step way to understand what drives your bill, what to verify on your notice, and what to do if the numbers look off.

Inheriting a home comes with many considerations – emotionally and financially. When it comes to property taxes, the key fact is: Yes, you do inherit the tax obligations of the property. The home’s annual property tax bill now falls to you (or whoever inherits it). However, the situation isn’t always straightforward.

Here’s what heirs should know in 2025

• Step-up in basis (for capital gains): For federal taxes, inherited property gets a stepped-up basis

(the value is reset to the market value at the date of death 32 ). This usually minimizes capital gains tax if you sell. But this step-up has no direct effect on annual property taxes (those are governed by local assessed value rules). It’s useful to get a professional appraisal at the time of inheritance to establish basis, but remember that property tax assessments depend on local rules, not IRS rules.

• Taking over tax payments: As the new owner, you will receive the property tax notices and must

pay them. If the decedent had any unpaid taxes or liens at death, the estate typically covers those. Going forward, taxes are your responsibility. If you plan to sell quickly, the tax escrow can usually be prorated at closing. If you keep the house, be prepared to set aside funds each year for taxes and enroll in any local relief.

• Homestead and exemptions for heirs: Many heirs don’t realize that a house they lived in as their

parent’s home can qualify for homestead treatment. Some states automatically reapply homestead status to the surviving spouse or child. For example, Texas now allows heirs of a primary residence to claim the full homestead exemption, even with multiple heirs. Other states have similar protections (though rules vary). If you qualify (e.g. the property becomes your primary home), apply for any homestead or senior exemptions in your county. This can substantially reduce your tax bill. PropTaxHelper provides an “Inherited Homestead Exemption” guide for most states.

• Inheritance vs. property taxes: Estate or inheritance taxes (at the state level) are separate issues.

For instance, in 2025 the federal estate tax only applies to estates above about $13.99 million. A few states charge inheritance tax (paid by heirs), but most do not. These do not affect the annual property tax on the house. Only real estate transfer taxes (if any) or estate clearance matters to closing the estate. But once you own the home, the only tax you pay on it regularly is the local property tax.

• After transfer of ownership: Be sure the deed is properly recorded in your name. In some places, a

new transfer can trigger a reassessment at fair market value (and thus a jump in taxes). However, many states exempt transfers between close relatives. For instance, California allows parents to transfer their primary home’s tax value to a child’s new residence under Proposition 19 (with some limitations). Learn your state’s rules for parent-child transfers – you might keep the old tax base. If you plan to sell: The step-up basis usually means you’ll pay little or no capital gains tax on the sale, but you still must pay any property tax due up to closing. Keep all closing documents; they will show how the taxes were prorated. If selling as-is, sometimes sellers negotiate to leave enough funds for a final tax

payment. 9 If you keep or rent: You’ll now pay the annual tax bills, but can deduct them if you rent it out (rental property taxes are deductible expenses). And if it becomes your primary home, applying a homestead exemption immediately (if eligible) is crucial to avoid paying the full tax rate. Key takeaway: Inheriting a home doesn’t wipe out property taxes; it transfers them to you. The good news is that you can often reduce your tax burden by taking advantage of homestead or family transfer provisions 34. Check with your county assessor or a tax professional right away to understand deadlines (some exemptions require prompt filing) and apply for any breaks. You should also ensure the

estate has settled any back taxes so they don’t become your responsibility. For personalized assistance, PropTaxHelper offers an inheritance-tax clinic and referral to attorneys who specialize in estate property taxes.

Next steps

• Use the Property Tax Estimator to sanity-check your bill.
• If something looks off, run a quick Appeal Savings scenario.
• Scan the Articles list for related topics like exemptions, deadlines, and escrow planning.