Step-Up in Basis Calculator

At death, heirs receive a stepped-up basis equal to fair market value. This calculator shows the built-in gain that disappears and the capital-gains tax saved. Excludes IRAs and qualified plans, which do not receive a step-up.

Step-Up in Basis Calculator — Calculation Summary

Input / parameter	Value
Capital-gains rate	23.8%
Asset 1 — FMV / basis	$500,000 / $100,000
Asset 2 — FMV / basis	$300,000 / $50,000
Result
Total fair market value	$800,000
Total basis	$150,000
Built-in gain avoided	$650,000
Tax saved by step-up	$154,700

Source: IRC § 1014 (basis of property acquired from a decedent).

This is an informal planning estimate only, not legal or tax advice. Confirm all figures with the IRS, your state Department of Revenue, or a licensed estate attorney or CPA before relying on them.

Long-term capital-gains rate (%)

Asset fair market value ($)	Original basis ($)

Total FMV$800,000

Total basis$150,000

Built-in gain avoided$650,000

Tax saved by step-up$154,700

At death, heirs receive a stepped-up basis to fair market value — the accrued capital gain is never taxed. For many families below the estate-tax threshold, this step-up is worth far more than any estate-tax saving. Excludes IRAs/qualified plans (no step-up).

Informal estimate only — not legal or tax advice. Figures cite federal statute (IRC § 2010, OBBBA 2025) and each state's Department of Revenue. Tax laws and exemption amounts change yearly; confirm the current rule with the IRS, your state agency, or a licensed estate attorney or CPA before relying on any number.

How this calculator works

A step-up in basis resets the tax cost of an inherited asset to its fair market value on the date of death. This calculator multiplies the built-in gain by your expected long-term capital-gains rate to show the tax savings. For families under the federal estate tax exemption, the step-up often saves more tax than any estate-tax planning technique.

Calculation method & sources

Step-up rule: IRC § 1014 generally gives heirs a basis equal to the fair market value of property at the decedent’s date of death.
Capital-gains rate: The default 23.8% combines the 20% federal long-term capital-gains rate and the 3.8% net investment income tax. Actual rates can be 0%, 15%, or 20% plus NIIT depending on income.
Excluded assets: IRAs, 401(k)s, and other tax-deferred retirement accounts do not receive a step-up in basis. Distributions are taxed as ordinary income to beneficiaries under the SECURE Act rules.

How to interpret your step-up in basis result

“Built-in gain avoided” is the total unrealized appreciation that would be taxed if the asset were sold today.
“Tax saved by step-up” is that gain multiplied by the capital-gains rate you entered.
A low-basis, highly appreciated asset (stock, real estate, a business) creates the largest step-up benefit.
For taxable estates under the $15M federal exemption, holding appreciated assets until death is often more tax-efficient than gifting them during life.

Related guides

Frequently asked questions

What is a step-up in basis at death?

A step-up in basis resets an inherited asset’s tax basis to its fair market value on the date of death. If the heir sells immediately, there is usually little or no capital-gains tax.

What kind of assets get a step-up in basis?

Most appreciated property owned at death gets a step-up, including stocks, real estate, business interests, and collectibles. Tax-deferred retirement accounts and annuities generally do not.

Is it better to hold an asset until death or gift it during life?

For estates under the federal exemption, holding appreciated assets until death is often better because the heir receives a stepped-up basis. A lifetime gift carries over the donor’s original basis, exposing the recipient to capital-gains tax on all appreciation.

What capital gains rate should I use?

Use the rate you expect the heir to pay when selling. For high-income taxpayers in 2026, that is often 23.8% (20% long-term gain + 3.8% NIIT). Middle-income taxpayers may owe 15%, and some owe 0%.

Do IRAs and 401(k)s get a step-up?

No. Retirement accounts pass their ordinary-income character to beneficiaries. Distributions are taxed as income under the 10-year distribution rule for most non-spouse beneficiaries.

Not legal or tax advice. This estimate follows the federal and state statutes referenced on this page but cannot capture every factor (trusts, business valuation, charitable deductions, prior gifts, state add-backs).