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.
Frequently Asked Questions
What is the step-up in basis at death?
When you inherit an asset, your cost basis is 'stepped up' to the fair market value (FMV) on the date of the original owner's death, under IRC Section 1014. This means any appreciation during the decedent's lifetime is never subject to capital gains tax.
How does step-up in basis reduce capital gains tax?
Without step-up: if you inherited stock bought for $10,000 now worth $100,000, you'd owe capital gains on $90,000 if sold. With step-up: your basis becomes $100,000, so selling at $100,000 triggers zero gain. Only appreciation after the date of death is taxable.
Does step-up in basis apply to all assets?
Step-up applies to most inherited assets: stocks, real estate, business interests, collectibles. It does not apply to assets held in IRAs, 401(k)s, or other tax-deferred accounts. Community property states allow a double step-up on both halves for surviving spouses.
What are the 2026 long-term capital gains tax rates?
For 2026, the federal long-term capital gains rates are 0% (income up to $47,025 single), 15% (most middle-income taxpayers), and 20% (income above $518,900 single). High earners also owe 3.8% Net Investment Income Tax. Source: IRS.gov.
Is the step-up in basis going away?
Several proposals have sought to eliminate or limit step-up in basis, but as of May 2026 it remains the law. Monitor IRS.gov for any future legislative changes.
What is a 'carryover basis'?
Carryover basis means the inheritor takes the original owner's cost basis rather than FMV at death. This is the opposite of step-up — meaning you owe capital gains on all appreciation since original purchase. This would apply if step-up were repealed.