Probate & Inheritance
What Is Stepped-Up Basis?
Stepped-up basis is a tax rule that resets the cost basis of inherited property to its fair market value on the date of the previous owner's death. It often means heirs owe little or no capital gains tax on a quick sale.
Normally, capital gains tax is based on the difference between what you paid for a property and what you sell it for. With inherited property, the 'cost basis' is stepped up to the market value as of the date of death.
This matters enormously for heirs. If you inherit a house worth $300,000 and sell it shortly after for around that amount, your taxable gain is close to zero — even if the deceased originally bought it decades ago for far less.
Stepped-up basis is one reason a prompt sale of an inherited home is often tax-efficient. Always confirm specifics with a CPA, as individual circumstances vary.
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