Step-Up in Basis

Step-up in basis is a tax rule that adjusts the value of an inherited asset to its current market value at the time of the original owner’s death. This means that if you inherit property or investments, your taxable gain is calculated based on this “stepped-up” value, not the original purchase price. As a result, any appreciation in value that occurred before inheritance isn't taxed if you sell shortly after inheriting it. This rule often reduces potential capital gains taxes for heirs, helping preserve more of the estate's value.