City of Santa Cruz Measure C took effect on July 1, 2026, and it applies only inside city limits. Since then I have had the same conversation repeatedly, and it always starts the same way: “We’re fine — inheritances are exempt.”
Half right. And the half that is missing is the expensive one.
The two transfers are not the same transaction
When a parent dies and the house passes to the children, that is one transfer. When the children then sell the house to a buyer, that is a second, completely separate transfer. Measure C treats them differently.
The first transfer is exempt. SCMC 3.34.258 adopts California Revenue & Taxation Code §11930, which covers inter vivos gifts and transfers by reason of death. Property moving from a decedent, or from their trust, to heirs or beneficiaries is not taxed.
The second transfer is fully taxable. SCMC 3.34.160(b) applies the tax “regardless of the method by which the transfer is accomplished or the relationship of the parties.” The estate, the trust, or the heir selling to a buyer is an ordinary taxable conveyance. There is no inherited-property discount on it.
So the correct sentence is: inheriting is exempt; selling what you inherited is not. Anyone who tells you the first half and stops has told you something true and useless.
What it actually costs
Measure C is marginal, which means each rate applies only to the slice of the price inside its band — not to the whole price. The bands:
| Portion of the price | Rate |
|---|---|
| Up to $1,800,000 | — |
| $1,800,000 to $2,500,000 | 0.5% |
| $2,500,000 to $3,500,000 | 1.0% |
| $3,500,000 to $4,500,000 | 1.5% |
| Above $4,500,000 | 2.0% |
The whole tax is capped at $200,000, which only starts to bind somewhere around $13.5 million.
The city’s own published example: a $2,600,000 sale owes $4,500. You can check that in two lines. The slice from $1,800,000 to $2,500,000 is $700,000 at 0.5%, which is $3,500. The slice from $2,500,000 to $2,600,000 is $100,000 at 1%, which is $1,000. Together, $4,500.
One detail that catches people: the base the tax is computed on includes debt remaining on the property, not just cash changing hands.
Marginal is the good news, and it is rare
Measure C being marginal is genuinely gentler than what happens over the hill. San Jose’s Measure E and Mountain View’s Measure G both apply to the entire consideration once you cross a threshold, which creates cliffs where one extra dollar of price costs five figures. I wrote that up separately — it is the single most expensive rounding error in Silicon Valley.
The city’s FAQ is not the ordinance
The city’s public FAQ lists four exemptions. The ordinance contains eleven, running from SCMC 3.34.190 through 3.34.258, plus the restricted-affordable exemption at 3.34.250. If your situation looks unusual, the FAQ is not where the answer lives. Read the ordinance, or have someone read it for you.
And there is a second tax in the same measure
Measure C also imposes a flat $96 per year parcel tax inside city limits, fixed for twenty years from fiscal year 2026-27 and collected with your property taxes. It is a holding cost, not a closing cost, and it is easy to miss because the conveyance tax gets all the attention.
Two things about it worth knowing. Residential landlords may not pass it through to tenants — and note that the city’s own FAQ miscites that provision as 3.34.070, which is the exemptions section; the pass-through prohibition is at 3.34.060(b). And there are exemptions for low-income homeowners at or below 60% of area median income, and for low-income homeowners aged 65 and over at or below 80% of AMI, on a primary residence, by application.
For the senior exemption, the 80% AMI limits are $74,360 for one person, $85,000 for two, $95,600 for three and $106,240 for four. The city’s finance office handles it: 831-420-5068, or askfinance@santacruzca.gov.
What changes from here
The thresholds CPI-adjust starting July 1, 2027, and the measure sunsets after fiscal year 2046-47. There is also a live variable: the Local Taxpayer Protection Act qualified for the November 2026 ballot, and the city has said it is watching what that would do to Measure C. I will update this page when there is something real to report rather than speculating now.
If you are a trustee or an heir looking at a Santa Cruz city property, the number you need is not the transfer tax in isolation — it is the whole net, including the step-up in basis, which usually dwarfs this. Run it, then come talk to me about the parts a calculator cannot model.