Step-Up Basis Calculator
Inherited assets get a step-up in basis to fair market value at date of death (IRC §1014). The heir's pre-inheritance gain disappears tax-free. This calculates the tax savings on highly-appreciated assets.
| FMV at death (new basis) | — |
| Original basis (decedent's) | — |
| Built-in gain erased | — |
| Federal LTCG that would have been owed | — |
| State tax that would have been owed | — |
| NIIT 3.8% (if applicable) | — |
| Total tax saved by step-up | — |
Step-up in basis (IRC §1014) resets an inherited asset's tax basis to fair market value at date of death. All pre-death capital gain disappears tax-free for the heir — one of the biggest tax planning advantages in the IRC.
How Step-Up Works
At decedent's death, heir's basis in inherited property = FMV on date of death (or alternate valuation 6 months later, if elected). If heir sells immediately, no capital gain. Holding period also resets to long-term automatically per IRC §1223(9).
What Qualifies
Most appreciated property held in decedent's name: stocks, bonds, real estate, business interests, collectibles. Exceptions: IRD (income in respect of decedent — IRAs, annuities, deferred comp); these retain decedent's basis and are taxed as ordinary income to heir.
Joint Property and Step-Up
Community property: full step-up on both halves at first spouse's death (CA, AZ, NV, etc.). Common-law jointly-held: only deceased spouse's half steps up. Strategic titling can capture double step-up in community property regimes.
Gift vs Inherit Decision
Lifetime gifts transfer donor's basis (carryover). Death transfers FMV basis (step-up). General rule: gift low-basis (recently acquired) assets, hold high-basis or low-appreciation assets until death. Opposite for tax-loss harvesting (gift losses are wasted).
Last updated May 2026. Sources: IRC §1014, IRS Pub 559 Survivors.