Inherited Property Capital Gains Calculator

How the stepped-up basis works

Your basis in inherited property is its fair market value on the date of death. The gain from what the person who died paid up to that date is never taxed as income. You pay tax only on the change between the date of death and your sale.

• Alternate valuation date. If the executor filed an estate tax return and elected the alternate valuation date, your basis is the value 6 months after the death, or on the date the property was sold or distributed if that came first.
• When an estate tax return was filed. Your basis can't be higher than the value reported on the return. The executor sends each beneficiary a Form 8971 Schedule A showing it.
• Joint property with a spouse. When one spouse dies, only their half gets a new basis. In the community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin), both halves of community property do.
• Improvements you make after the death, such as a new roof, add to your basis. Repairs don't.
• Property given to the person shortly before death. If you gave property to someone within one year of their death and it comes back to you (or your spouse) when they die, there is no step-up. You keep the old basis.

2026 and 2027 capital gains rates

The gain is stacked on top of your other taxable income. The part that falls below the first threshold is taxed at 0%, the part up to the second at 15% and the rest at 20%. The 3.8% net investment income tax applies on top when your modified adjusted gross income passes its threshold, which is not adjusted for inflation.

Taxable income thresholds are from Rev. Proc. 2025-32 (2026) and Rev. Proc. 2026-35 (2027). The rates follow the year you sell, not the year of the death. Most states also tax capital gains, usually as ordinary income.

Example: selling an inherited house

Your mother bought her house for $90,000. It was appraised at $400,000 on the date she died. A year later you sell it for $450,000 and pay $27,000 in commission and closing costs. You are single, with $80,000 of other taxable income.

• Amount realized: $450,000 minus $27,000 = $423,000.
• Basis: $400,000, the date-of-death value.
• Gain: $23,000, all long-term and taxed at 15%: $3,450. Your income stays under $200,000, so there is no 3.8% tax.
• With her original $90,000 as the basis, the gain would be $333,000 and the federal tax about $58,044.

Selling an inherited house

• Get a date-of-death appraisal. A licensed appraiser can value the house as of the date of death, even months later. It is your proof of basis if the IRS asks, and the estate may need it anyway for the probate inventory or a state inheritance tax return.
• The home sale exclusion of $250,000 ($500,000 for a married couple) applies only if you owned the house and lived in it as your main home for 2 of the 5 years before the sale. Inheriting it doesn't count as living there.
• A surviving spouse can count the time their late spouse owned and lived in the home, and can exclude up to $500,000 if they sell within 2 years of the death, haven't remarried and meet the other tests in IRS Publication 523.
• If the estate sells the house before it is distributed, the gain or loss goes on the estate's Form 1041. Capital gains usually stay with the estate, which pays the tax. In the estate's final year they pass out to the heirs on Schedule K-1.
• If you rent it out first, you can depreciate it from the date you start renting, and that depreciation is taxed when you sell. This calculator doesn't include it.
• Transfer tax on the sale is a selling expense, so add the seller's share to your selling costs. It runs from nothing in states like Texas to several percent in parts of New York, Pennsylvania and California; work it out with the transfer tax calculator by state, or see the whole sale, with commission and each heir's share, in the net proceeds calculator.

Inherited in Pennsylvania, New Jersey, Maryland, Kentucky or Nebraska?

Capital gains tax is not the only tax on inherited property. Five states charge an inheritance tax on what each heir receives, based on the same date-of-death value you use as your basis. It is owed whether or not you sell, and it is usually due within months of the death, long before the sale.

• Pennsylvania inheritance tax calculator: taxes even children and grandchildren.
• New Jersey inheritance tax calculator
• Maryland inheritance tax calculator
• Kentucky inheritance tax calculator
• Nebraska inheritance tax calculator

Use one appraisal for both. If the estate had to file a federal Form 706, your basis must match the value on it. If not, the value on the state return is still the first thing the IRS will compare your basis to, and a low appraisal that saves inheritance tax now raises your capital gains tax when you sell.

What doesn't get a step-up

Income the person who died had earned but not yet received is called income in respect of a decedent. It keeps its tax character, so you pay ordinary income tax on it when you receive it (IRS Publication 559). The main examples:

• Traditional IRAs, 401(k)s and other pre-tax retirement accounts. Withdrawals are taxed as ordinary income.
• Annuities, on the part above what the person paid in.
• Unpaid wages, bonuses and accrued interest, including the interest on U.S. savings bonds that hadn't been taxed.

The inheritance itself isn't income. See do you pay tax on an inheritance for the federal and state rules.

How to report the sale

1. Report the sale on Form 8949 and carry the total to Schedule D of your Form 1040.
2. Write "INHERITED" in the date acquired column. That is how the IRS knows the gain is long-term.
3. Use the date-of-death value plus improvements as your cost basis, and subtract selling costs from the sale price.
4. Real estate sales come with a Form 1099-S from the closing agent, and stock sales with a Form 1099-B from the broker. The broker may not know the stepped-up basis, so check the basis on the 1099-B and correct it on Form 8949 if needed.

Related guides for heirs

• Do you pay tax on an inheritance? Federal and state rules
• Selling an inherited house: net proceeds calculator
• Transfer on death deeds by state
• Real estate transfer tax by state, and on an inherited house
• Affidavit of heirship in Texas
• Transfer a car title after death, by state
• Inheritance tax by state: the 5 states that tax heirs
• Inheritance tax calculators by state
• Estate tax vs inheritance tax
• Small estate affidavit by state