What is the step-up in basis?

Inherited property receives a new cost basis equal to the fair market value at the date of death. Any unrealized appreciation during the lifetime of the deceased is permanently eliminated from income tax.

How much capital gains tax can step-up save?

Significant. Example: stock purchased for $10,000, worth $1,000,000 at death. Heir basis = $1,000,000. If heir sells immediately, zero capital gains tax. Without step-up, $990,000 gain would be taxable.

Does gifted property get a step-up?

No. Gifted property carries over the donor original basis (carryover basis). This is why it often makes sense to hold appreciated assets until death rather than gifting them, unless avoiding estate tax is the priority.

What about IRAs and step-up?

Traditional IRA assets do not receive a step-up because contributions were pre-tax. All IRA distributions are ordinary income regardless of underlying investment gains. Roth IRAs are distributed tax-free.

How does community property affect step-up?

In community property states (CA, TX, WA, etc.), both halves of community property receive a step-up when one spouse dies. This is more favorable than separate property, which only gets step-up on the decedent share.

US Step-Up in Basis at Death Calculator

Calculate step-up in basis for inherited assets. At death, inherited property receives a new basis equal to fair market value on date of death. Eliminates built-in capital gains permanently.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate step-up in basis for inherited assets. At death, inherited property receives a new basis equal to fair market value on date of death. Eliminates built-in capital gains permanently. Use the step-up in basis result to inform your calculation.

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US Step-Up in Basis at Death Calculator

How to Use

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Frequently Asked Questions

What is the step-up in basis?

How much capital gains tax can step-up save?

Does gifted property get a step-up?

What about IRAs and step-up?

How does community property affect step-up?