Inherited Property Tax Calculator
Tax on selling inherited or gifted property: the stepped-up (or carryover) basis, the gain, federal capital gains, NIIT and state tax, how much the step-up saved versus a lifetime gift, the home-sale exclusion and the estate-tax check.
| Your basis | — |
|---|---|
| Taxable gain (or loss) | — |
| Federal capital gains tax | — |
| Net investment income tax (3.8%) | — |
| State tax | — |
| Total tax | — |
| Tax the step-up saved versus a lifetime gift | — |
| If it were your home (§121 exclusion) | — |
| Estate tax check | — |
In short
Inherited property takes a stepped-up basis equal to its fair market value at the owner's death, so appreciation during their life is never taxed and selling soon afterwards produces little or no gain; gifts made during life carry the giver's original basis and the whole gain is taxed when sold. Retirement accounts do not step up. Gains on inherited property are automatically long-term, taxed at 0/15/20% plus 3.8% NIIT above $200,000 / $250,000 of MAGI.
Who this is for: US heirs selling an inherited home or stock, and parents deciding whether to gift now or leave assets at death.
Stepped-up basis explained
- Inheritance: basis resets to the date-of-death value, so decades of appreciation escape capital gains tax entirely. Selling soon after death usually produces little or no gain — often a small loss after selling costs.
- Lifetime gift: the recipient inherits the giver's basis (and holding period); the gain is taxed when sold. Gifting appreciated property to avoid probate can cost the family 20–30% of the gain.
- Jointly owned with a spouse: only the deceased's half steps up in common-law states; community-property states step up both halves.
- What does not step up: traditional IRAs, 401(k)s, annuities, savings bonds and other "income in respect of a decedent" — heirs pay income tax on withdrawals (10-year rule for most non-spouse IRA heirs).
- Interaction with estate tax: the step-up applies whether or not estate tax is owed; with a $15 million exemption in 2026, very few estates pay it, so the step-up is the bigger planning lever.
See also: Gift & Estate Tax Calculator 2026.
Assumptions
- Basis = FMV at death (inherited), original cost (gift), average (joint common-law) or FMV (joint community property).
- Gain = sale − selling costs − basis; long-term rates stacked on other income; NIIT 3.8% above the MAGI threshold; state at the flat rate.
- Home exclusion $250,000 / $500,000 applied if the 2-of-5-year test were met.
Worked example
Stepped-up basis $650,000. Gain = $665,000 − $650,000 = $15,000 (long-term automatically): federal 15% = $2,250, no NIIT (MAGI under $200,000), state $750 — total $3,000. Had the house been gifted during life, the basis would be $150,000 and the $515,000 gain would cost about $124,000 (including 20% on part of it and NIIT) — the step-up saved roughly $121,000. If the heir had lived in it as a main home the gain would be fully excluded.
Frequently asked questions
Do I pay capital gains tax on inherited property?
Only on appreciation after the date of death — the basis steps up to the fair market value at death, so selling soon afterwards usually produces little or no taxable gain.
Is it better to inherit or be gifted a house?
Inherit, for tax: a gift carries the original basis and the whole gain is taxed when you sell; an inheritance wipes out the gain accrued during the owner's life.
Does an inherited IRA get a step-up?
No — retirement accounts and annuities are taxed as income to the heir; most non-spouse heirs must empty an inherited IRA within 10 years.
How do I prove the date-of-death value?
An appraisal dated near the death (or the estate tax return value); for securities, the average of the high and low prices on the date of death.
What is the alternate valuation date?
The executor may value the estate six months after death instead; the heirs' basis then follows that value. Only available if it lowers both the estate value and the tax.
Does inherited rental property get a step-up?
Yes — and the depreciation schedule restarts at the new basis, which also eliminates the decedent's depreciation recapture.
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