Stepped-Up Basis Calculator 2025 β Inheritance vs Gift Tax Savings
Calculate the capital gains tax savings from stepped-up basis on inherited assets. Compare inheriting vs receiving a gift of appreciated property.
$
What the deceased paid for the asset $
Value on date of death (stepped-up basis) $
Only matters if appreciating after inheritance $0
Tax Saved by Inheritance
$0
Gain if Inherited & Sold
$0
Gain if Gifted (carryover basis)
$0
Tax if Inherited
Stepped-Up Basis Analysis
How to Use This Stepped-Up Basis Calculator
Enter the original cost basis (what the decedent paid) and the fair market value at death (the stepped-up basis). If you plan to sell the asset after inheriting, also enter the current value. The calculator shows the capital gains tax you avoid by inheriting instead of receiving as a gift.
The Formula
Stepped-up basis = FMV at date of death
Gain if inherited = current FMV β stepped-up basis
Gain if gifted = current FMV β original cost basis (carryover)
Tax savings = (gifted gain β inherited gain) Γ combined tax rate
The "forgiven" gain = FMV at death β original cost basis
Gain if inherited = current FMV β stepped-up basis
Gain if gifted = current FMV β original cost basis (carryover)
Tax savings = (gifted gain β inherited gain) Γ combined tax rate
The "forgiven" gain = FMV at death β original cost basis
Example
Parent bought stock for $50,000; worth $400,000 at death; sold by heir for $420,000:
If inherited: stepped-up basis = $400,000; gain = $420,000 β $400,000 = $20,000
Tax at 15% LTCG: $3,000
If gifted: carryover basis = $50,000; gain = $420,000 β $50,000 = $370,000
Tax at 15%: $55,500
Tax saved by inheriting: $52,500
If inherited: stepped-up basis = $400,000; gain = $420,000 β $400,000 = $20,000
Tax at 15% LTCG: $3,000
If gifted: carryover basis = $50,000; gain = $420,000 β $50,000 = $370,000
Tax at 15%: $55,500
Tax saved by inheriting: $52,500
Extended
Gift vs Inheritance Comparison
Side-by-side analysis of gifting now vs inheriting at death for various asset types
Compare multiple scenarios for gifting now vs holding to death.
Gift vs Inheritance β Scenario Comparison
| Scenario | Basis | Gain at Sale | Tax at 15% | Net Proceeds |
|---|
Community Property Advantage
Frequently Asked Questions
What is stepped-up basis?
When you inherit an asset, its cost basis is "stepped up" to the fair market value at the date of the decedent's death (or the alternate valuation date 6 months later). This means any appreciation during the decedent's lifetime is permanently excluded from capital gains tax. For example, if your parent bought stock for $10,000 and it was worth $100,000 at death, your basis becomes $100,000 β you can sell immediately with no capital gains tax.
How much tax does stepped-up basis save?
Stepped-up basis saves capital gains tax on the appreciation that occurred before the owner's death. The tax savings = (FMV at death β original cost) Γ capital gains tax rate. For inherited property worth $500,000 with a $100,000 original basis, the tax savings = $400,000 Γ 20% = $80,000 (plus 3.8% NIIT for high earners = $95,200 total saved).
Does stepped-up basis apply to all inherited assets?
Stepped-up basis applies to most capital assets: stocks, bonds, real estate, business interests, and collectibles. It does NOT apply to: IRAs and 401(k)s (which are income in respect of a decedent), annuities, savings bonds, income earned but not received before death. Assets in trusts may also have different basis rules depending on trust type.
What is the difference between inheriting and receiving a gift?
Inherited assets get stepped-up basis β you take the FMV at death as your basis, eliminating built-in gains. Gifted assets carry over the donor's original low basis β you inherit the donor's tax problem. For highly appreciated assets, it is almost always better to hold until death rather than gift during lifetime, unless the estate is large enough to trigger estate tax.
Is there a double step-up for community property?
Yes! In community property states (AZ, CA, ID, LA, NV, NM, TX, WA, WI), when one spouse dies, BOTH halves of community property get stepped up to current fair market value β not just the deceased spouse's half. This is a significant advantage over separate property states where only the deceased's half gets stepped up. Couples in community property states can save substantially more in capital gains tax.