Definition
Tax provision adjusting property cost basis to fair market value at death, eliminating capital gains taxes.
Where you’ll meet it
Who can actually sell this house, and what has to happen first?
See it in Selling a home I inherited · Step 1About this term
Step-up basis allows heirs to inherit property with reset cost basis eliminating capital gains tax on pre-death appreciation. Significant tax benefit.
Pro Tip
Step-up basis is powerful benefit; can eliminate decades of capital gains; important in estate planning.
Example
Property purchased for $200,000 appreciates to $400,000; heir inherits with $400,000 basis, eliminating $200,000 capital gains tax.