Estate Step-Up Basis Calculator 2026
Calculate how much capital gains tax you save when an inherited asset receives a stepped-up cost basis equal to its fair market value at the date of death.
What Is the Estate Step-Up in Basis?
The step-up in basis is a federal tax rule under IRC Section 1014 that resets the cost basis of an inherited asset to its fair market value on the date the original owner died. This effectively eliminates capital gains tax on all appreciation that occurred during the deceased person's lifetime. It is one of the most powerful tax benefits in U.S. estate planning — and one of the most frequently overlooked by heirs who sell inherited property without understanding the tax implications.
For example: a parent bought stock for $10,000 in 1990. At death in 2025, it was worth $500,000. The heir's stepped-up basis is $500,000. If the heir sells for $510,000, only $10,000 of gain is taxable — not $490,000. At a 15% rate, that saves $73,500 in capital gains tax. Source: IRS Publication 544, IRC Section 1014. Last updated: May 2026.
2026 Federal Capital Gains Rates
| Rate | Single Filer Income | Married Filing Jointly | Notes |
|---|---|---|---|
| 0% | Up to $47,025 | Up to $94,050 | No capital gains tax |
| 15% | $47,026 – $518,900 | $94,051 – $583,750 | Most inheritors |
| 20% | Over $518,900 | Over $583,750 | High-income taxpayers |
| +3.8% NIIT | Net investment income over $200K | Over $250K | Additional Medicare tax |
Community Property and Special Situations
In community property states (California, Texas, Arizona, Nevada, Washington, Idaho, New Mexico, Louisiana, Wisconsin), surviving spouses may receive a double step-up — both halves of jointly owned community property get stepped up to FMV at death, not just the deceased spouse's half. This can create even larger tax savings on appreciated assets. Assets held in IRAs, 401(k)s, and other tax-deferred accounts do NOT receive a step-up — withdrawals from those accounts are taxed as ordinary income. Always consult an estate attorney or CPA for your specific situation. Source: IRS Publication 550. Last updated: May 2026.