What Kind of Assets Get a Step-Up in Basis at Death?
A step-up in basis is one of the biggest tax benefits built into the estate system. It resets an inherited asset’s tax cost to fair market value at the date of death, potentially erasing decades of built-in capital gains. But not every asset qualifies.
Assets that usually get a step-up
Stocks, bonds, mutual funds, real estate, business interests, collectibles, and most personally owned property receive a stepped-up basis under IRC § 1014. The heir’s basis becomes the fair market value on the date of death.
Assets that do NOT get a step-up
Tax-deferred retirement accounts (traditional IRAs, 401(k)s, 403(b)s), annuities, and U.S. savings bonds do not receive a step-up. Distributions are generally taxed as ordinary income to beneficiaries.
Jointly owned property
For property held jointly with a non-spouse, only the deceased owner’s share typically receives a step-up. For spouses in community-property states, the entire property may receive a double step-up.
Assets already gifted during life
Lifetime gifts carry over the donor’s original basis. If the recipient later sells, they pay capital gains on all appreciation since the donor acquired the asset.
Estimate the savings
Our Step-Up in Basis Calculator multiplies the built-in gain by your expected capital-gains rate to show the tax avoided.