Step-Up Basis vs Lifetime Gift Calculator (2026)
Assets left at death get a step-up to fair market value (basis reset). Assets gifted during life carry over the donor's original basis. This 2026 tool shows the tax saved by waiting — usually 15-23.8% × appreciation.
| Asset appreciation (FMV - basis) | — |
| Step-up basis (death) — heir tax on later sale | — |
| Step-up basis (death) — estate tax on FMV | — |
| Step-up total tax | — |
| Gift path — donee carryover basis tax | — |
| Net advantage of step-up | — |
Assets owned at death receive a step-up in basis to fair market value under IRC 1014 — heirs who sell immediately owe zero capital gains tax. Assets gifted during life carry over the donor's original basis under IRC 1015 — the recipient owes capital gains on the full appreciation when they sell. For highly appreciated assets held by taxpayers below the estate tax exemption, waiting almost always beats gifting.
When Step-Up Wins (Most US Households)
The federal estate tax exemption for 2026 is $13.99M per person ($27.98M married), set under OBBB 2026. Estates below this owe no federal estate tax. For highly appreciated assets, step-up at death eliminates 15-23.8% capital gains on the entire appreciation — for a $500K asset with $80K basis, that's $63K-$100K in tax saved. Holding and bequeathing dominates gifting for most taxpayers below the federal exemption. The proposed elimination of step-up basis (Biden 2021, 2025 proposals) did NOT pass in OBBB 2026; step-up remains intact.
When Gifting Beats Step-Up
Four scenarios favor gifting during life. (1) Estate above the exemption — use lifetime gift exclusion ($13.99M unified with estate exemption, plus $19,000/year per recipient annual exclusion not counted against lifetime). (2) Asset expected to appreciate dramatically — gifting freezes the gift value at today's lower number; future appreciation occurs outside the donor's estate. (3) Recipient is in 0% capital gains bracket ($48,350 single / $96,700 MFJ for 2026) while you're in 15-20% — recipient pays no tax on the gain. (4) State estate tax in Massachusetts, Oregon, Washington, Minnesota, etc. — state exemptions are much lower ($1M-$5M typically), making lifetime gifting attractive even below federal exemption.
Last updated May 2026. Sources: IRS IRC 1014.