Step-Up in Basis

tax

Also known as: step-up basis, stepped-up basis, IRC Section 1014

Updated · Written and reviewed by Konstantin Iakovlev

Detailed explanation

IRC Section 1014. A house bought for $100K decades ago worth $800K at death passes to the heir with a basis of $800K — sell next week for $800K, no capital gain. This is one of the most powerful estate-planning tools in the US tax code and is why many advisors recommend holding highly appreciated assets until death rather than gifting (gifts retain the original basis). Community-property states (CA, TX, AZ, etc.) get a "double step-up" where the surviving spouse's share also resets. Periodically targeted for repeal but has survived every recent tax reform.

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