What is it?

Prop 40 is a one-time 5% tax on the net worth of California residents worth $1B or more, for the 2026 tax year only. It also taxes certain trusts a billionaire has put property into. All persons who were residents of California as of January 1, 2026 are subject to the tax.

The tax phases in at net worths between $1B and $1.1B, and applies to the entire net worth so it is not a progressive tax. A married couple counts as one person.

Every California resident filing a 2026 state tax return must declare that their net assets were $1B or less, or else file the wealth tax forms.

What counts as net worth

Everything the taxpayer and their spouse own worldwide, minus debts, except real estate, retirement accounts, up to $5M of art, or other property outside California, unless moved to dodge the tax.

Where the money goes

Revenue goes into a new fund held outside the General Fund, exempt from the state spending limit. It is split 90% to health care (Medi-Cal and other coverage for low- and moderate-income people) and 10% to K-14 education and food assistance (CalFresh and school meals).

Read the full annotated legal text →