Do You Pay Income Tax on an Inheritance in California?

California has no inheritance tax and no state estate tax, and an inheritance itself is not treated as taxable income on your return. Receiving proceeds from the sale of an inherited home does not, by itself, create ordinary income tax.

The one tax to keep in mind is capital gains on appreciation after the date of death, which the stepped-up basis usually keeps small on a prompt sale. Estate tax only affects very large estates above the high federal exemption, so the typical family estate owes none. In short, most heirs receive their share of a home sale without an income-tax bill, but you should confirm the capital-gains picture with a CPA, especially if the home rose in value before selling.