Step-Up in Basis Calculator — Tax on Selling Inherited Property

2026 New

See your stepped-up basis on inherited stock, a home or a rental, the tax when you sell, and how much more you would owe had the same asset been given to you during life.

By Konstantin Iakovlev · Updated September 2026 · Source: IRS Publication 551 and 559; IRC §§1014, 1015, 1223(9)

What you inherited
$
$
$

Your basis after the step-up

$500,000

Federal tax on the sale

$2,700

Saved versus receiving it as a gift

$71,176

Inherited vs. given during life

InheritedGift
Basis$500,000$100,000
Gain (loss) on the sale$18,000$418,000
Income tax on the gain$2,700$62,700
Net investment income tax (3.8%)$0$11,176
Federal tax$2,700$73,876

How your basis is set

OwnershipOwned by the person who died: full step-up
Basis the owner had$100,000
Value at death$500,000
Step-up$400,000
Your basis when you sell$500,000

Inherited property is always long-term, however soon you sell. Retirement accounts, annuities and other income in respect of a decedent get no step-up. If you gave the property to the person within a year before their death and it comes back to you, you keep your old basis (Section 1014(e)). The 2026 federal estate tax exemption is $15 million, so most estates owe no estate tax on the property; state capital gains tax is not included.

Use the Step-Up in Basis Calculator — Tax on Selling Inherited Property above to calculate your results. Enter your values and see instant results — all calculations run in your browser.

Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.

How It Works

When you inherit property, your tax basis is its value on the date of death, not what the person who died paid for it (IRC §1014). Every dollar of growth during their lifetime disappears for income tax, so selling soon after inheriting usually produces little gain or none. Inherited property also counts as long-term however soon you sell, so any gain gets the 0%, 15% or 20% rates.

A gift works differently. Someone who receives property during the giver's life takes over the giver's basis (§1015), so the whole gain built up over the years is taxed when they sell. For a rental, the giver's past depreciation carries over too and is taxed at up to 25%, while at death that depreciation is wiped out. That is why appreciated assets are often better left in a will than given away late in life.

Spouses get special treatment. Property held jointly with a spouse steps up only by half, because only half is included in the estate. In the nine community-property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) both halves step up when the first spouse dies. Retirement accounts, annuities and other income in respect of a decedent get no step-up at all.

Example: Inherited Stock Sold Three Months Later

  1. 1 Input: a parent bought stock for $100,000; it was worth $500,000 at death. The heir, single with $60,000 of other taxable income, sells it three months later for $518,000 after costs.
  2. 2 Inherited: basis $500,000, gain $18,000, taxed at 15% = $2,700, with no investment income tax.
  3. 3 Given during life instead: basis $100,000, gain $418,000, taxed at 15% = $62,700, plus $11,175.80 of net investment income tax on the part of income above $200,000.
  4. 4 Result: inheriting instead of receiving the stock as a gift saves $71,175.80 of federal tax on this sale.

Source: IRS Publication 551 and 559; IRC §§1014, 1015, 1223(9) · Last updated: September 2026

Frequently Asked Questions

What is a step-up in basis?
When you inherit property, its tax basis becomes its fair market value on the date of death, so the gain that built up during the previous owner's life is never taxed. You pay capital gains tax only on growth after the death.
Is it better to inherit property or receive it as a gift?
For appreciated property, usually to inherit it. A gift carries over the giver's original basis, and for a rental the giver's depreciation too, so the whole gain is taxed when you sell; an inheritance resets the basis to the value at death.
Does a surviving spouse get a full step-up?
In the nine community-property states both halves of community property step up when the first spouse dies. Elsewhere, property held jointly with a spouse steps up only by half, the half included in the estate.
What inherited assets do not get a step-up?
Traditional IRAs, 401(k)s, annuities, installment notes and other income in respect of a decedent keep the decedent's tax character; withdrawals are taxed as ordinary income. Qualified Roth IRA withdrawals stay tax-free.

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