Here’s what you need to know this week
I hope all is well! Here’s what you need to know.
In the News
Tropical Storm Rachel has triggered another State of Emergency that covers Imperial, Los Angeles, Orange, and San Diego Counties. Once a State of Emergency goes into effect, it triggers the price gouging laws for 30 days (this does not mean it cannot be extended). This typically means you cannot raise rent more than 10% from what the previous tenant was paying when going on the market. Check your local laws or reach out and we can discuss options.
Proclamation of a State of Emergency
Law to Be Aware Of
Under Proposition 19, the property tax base transfer for inherited property is available only if the heir uses the inherited property as their primary residence, and only for the first approximately $1 million of value above the current assessed value. Vacation homes, rental properties, and any inherited property the heir does not plan to live in are fully reassessed to current market value upon transfer. For transfers occurring between February 16, 2025 and February 15, 2027, the exclusion limit is $1,044,586 above the parent’s factored base year value, and if the market value exceeds this combined amount, a partial reassessment will occur. The good news for heirs who do sell an inherited property is that inherited real estate still receives a stepped-up cost basis under IRC Section 1014 as of 2026, which can significantly reduce capital gains exposure at the time of sale. LA investors who are planning to inherit or pass on rental properties should work with an estate planning attorney now to restructure ownership before transfer, since Prop 19 eliminates the broad tax shield that previously made inheriting income properties so advantageous in California.
Proposition 19 and Inherited Property in California (2026)
General Real Estate Tip
Property taxes paid on investment properties are fully deductible against your rental income, and unlike personal property taxes which are subject to the SALT deduction cap, investment property taxes have no cap at all, meaning if you own multiple properties and pay $50,000 or more annually in property taxes, the entire amount is deductible. While the One Big Beautiful Bill Act raised the personal SALT cap to $40,400 for the 2026 tax year, that cap applies to your personal return and does not limit what you deduct as a business expense on Schedule E for your rentals. To maximize this deduction, make sure your property tax payments are tracked separately for each rental property and reported accurately on Schedule E, and confirm with your CPA that any supplemental tax bills issued mid-year by your county assessor, which are common in California after a sale or reassessment, are also captured and deducted in the correct tax year.
Comments are closed