Estate Step-Up in Basis Calculator

How Step-Up In Basis Works

IRC §1014 sets the basis of inherited property at fair market value on date of death (or alternate valuation date 6 months later). Built-in capital gain accumulated during decedent's lifetime is permanently eliminated for the heir. The heir's tax basis for future sale is the stepped-up value.

Community Property Double Step-Up

In community property states (CA, TX, AZ, NM, LA, ID, NV, WA, WI), both halves of community property step up at first spouse's death — not just the decedent's half. This is one of the largest tax advantages in the code for married couples in those states. Common-law states only step up the decedent's portion.

Step-Up vs Gifting

Gifting appreciated property during life transfers your basis to the recipient (no step-up). Holding until death gives step-up. For appreciated assets, holding to death + bequeathing typically beats gifting — especially for parents transferring wealth to children. Use annual gift exclusion for cash; pass appreciated assets via inheritance.

Step-Up Basis Template & IRS Form 8971

Executors of large estates use IRS Form 8971 — Information Regarding Beneficiaries Acquiring Property From a Decedent to report the new stepped-up basis directly to each beneficiary and to the IRS. Form 8971 plus a Schedule A for each beneficiary must be filed within 30 days of the estate tax return (Form 706), and the basis the heir uses on a future sale generally cannot exceed the value reported on this form. There is no separate "step-up basis template" the IRS publishes — Form 8971 + Schedule A is the official template.

For smaller estates that fall below the 2026 federal estate tax exclusion of $13.99 million per individual (no Form 706 required), heirs should still create a step-up basis worksheet at death: list each asset, its FMV on date of death (or alternate valuation date), and supporting evidence (broker statement, appraisal, Zillow comp, etc.). Keep this with the heir's tax records — it is the only proof of cost basis when the asset is eventually sold, sometimes decades later.

Updated 2026-07-09. Source: IRC §1014 Basis of Property Acquired from Decedent; IRS Form 8971 instructions.

Estate Step Up Basis Template — State-Level Estate Tax Overlay (2026)

Twelve US states plus DC impose their own estate tax with exclusions well below the federal $13.99M. Your step up basis template still applies (federal §1014 governs basis), but a taxable state estate triggers a state-level Form 706 equivalent and state-specific basis reporting. As of 2026: Massachusetts (2M exclusion), Oregon (1M), Rhode Island (1.775M), Connecticut (13.99M matching federal), Illinois (4M), Maine (7.15M), Maryland (5M — plus inheritance tax), Minnesota (3M), New York (7.16M), Vermont (5M), Washington (2.193M), Hawaii (5.49M), and DC (4.87M). Add a seventh column to your template: state exclusion status flagging any asset that pushes the estate above the state threshold. Confirm current-year thresholds on your state's revenue department site — several states re-index annually per IRS Estate Tax.

Source: IRS Estate Tax + individual state Department of Revenue publications (2026). Updated 2026-07-09.

Step Up Basis Template — Fully Worked Example (House, Stock, IRA, Collectibles)

To make the template concrete, here is a worked example for a $2.1M Texas estate (community property state) with four asset types — the most common composition our users ask about. The decedent died 2026-04-15 with a surviving spouse.

• Primary home — purchased 1998 for $185,000, FMV at death $720,000. Texas is community property, so BOTH halves step up to $720,000. Pre-death built-in gain of $535,000 is permanently eliminated. Source: county appraisal district 2026 tax notice.
• Brokerage account (VOO & AAPL) — original combined basis $94,000, FMV at death $612,000. Community property double step-up applies — new basis $612,000. Source: Fidelity closing statement dated 2026-04-15.
• Inherited Traditional IRA ($428,000) — NO step-up. Retirement accounts never receive basis adjustment under IRC §1014(c). Surviving spouse continues original cost basis; distributions remain ordinary income. This is the single biggest planning gap in DIY estates.
• Coin collection — $14,000 original basis (1980s purchases), FMV at death $47,000 by professional numismatist appraisal. Steps up to $47,000. Collectibles over $5,000 require written appraisal under IRS Pub 561.

Total estate $1.807M (excluding IRA which passes outside step-up rules) — well below the 2026 $13.99M exclusion, so no Form 706 required. The surviving spouse files the six-column template above, attaches the four valuation PDFs, and stores it with the death certificate copy. When stocks or the house sell years later, the IRS-accepted cost basis is the stepped-up value documented here — not the original 1998 / 1980s figures.

For 2026 federal estate tax thresholds and state-specific rules, see the IRS Estate Tax page. For DIY estate planning math run our estate tax calculator alongside this template.

Estate Step Up Basis Template — Alternate Valuation Date Election

One line item most DIY templates leave out: the alternate valuation date (AVD) election under IRC §2032 (Form 706 instructions). If a taxable estate's assets drop in value in the six months after death — a stock market correction, a housing pullback — the executor can elect to value the estate at the six-month-post-death FMV instead of the date-of-death FMV. This lowers estate tax owed, but it also fixes the heir's stepped-up basis at the lower AVD figure, which increases the heir's eventual capital-gains tax on sale. The template should have a seventh column: AVD election Y/N, with the alternate-date FMV listed for each asset. The election is all-or-nothing for the entire estate and must be made on the Form 706 filed within nine months of death (or 15 months with an extension). Below-exclusion estates skip this — they use date-of-death FMV only. Above-exclusion estates should model both dates in the template before filing 706.

Source: IRS Form 706 Instructions §2032 + Publication 559 (Survivors, Executors, Administrators). Updated 2026-07-17.

Estate Step Up Basis Template — DIY Worksheet Structure

Below-threshold estates (under the 2026 $13.99 million exclusion) skip Form 706 entirely, but the heir still needs a written cost-basis record for the eventual sale. The simplest estate step up basis template is a six-column spreadsheet, one row per asset: (1) asset description, (2) decedent's original basis, (3) FMV at date of death, (4) valuation source (broker statement, Zillow, formal appraisal), (5) date of death or alternate valuation date, (6) new stepped-up basis (column 3 for separate property, mid-value for joint tenancy, full column 3 for community property).

Keep this template stapled to a copy of the death certificate and date-of-death broker/Zillow screenshots. When the heir sells decades later, this single page beats reconstructing pre-death records from defunct brokerages. The IRS accepts the heir's contemporaneous worksheet as basis substantiation under IRS Publication 551 as long as the FMV evidence is documented at the time of death — not reconstructed later.