Do I owe tax if I do not sell?

No capital gain is due for a year in which you only hold the inherited home. Gain is taxed for the year you sell. The step-up still matters, because it sets the basis you will use later. Estate tax is a different tax on the estate, and this page does not compute it. Keep the appraisal even if you do not sell this year. You will need the date-of-death value when you do sell.

What if I keep the home as a rental?

The starting basis is still the date-of-death value. Depreciation you claim later reduces that basis. When you sell, the gain includes the depreciation piece under the usual rental rules. This example is a sale with no depreciation entered. If you rent the home for years, do not reuse the $20,000 figure. Enter the depreciation you actually claimed. The engine will reduce basis only when the property type is investment or mixed-use.

Is the gain short-term if I sell quickly?

Inherited property is treated as held long-term. The example uses a 2024 buy date and a 2026 sell date so the engine returns a long-term result. The federal tax in the table is the long-term rate, not the ordinary rate. Do not switch the sale to a short-term date to match a quick closing. Publication 551 and the Schedule D instructions are the sources for that holding-period rule.

Does an irrevocable trust get a step-up?

Assets in an irrevocable trust may not get a step-up. The answer depends on whether the property was included in the estate. This page cannot read the trust. Ask whoever handles the estate, and read Publication 551, before you type a basis. If there is no step-up, the basis may be the trust's old basis. Do not assume the $400,000 appraisal rule applies to every trust.

What basis does a gift use?

A gift usually keeps the donor's basis. An inheritance usually takes the date-of-death value. Using the wrong row of the table changes the gain. If you received the house as a gift before the owner died, do not use this example. The $100,000 purchase price may still matter for a gift. The $400,000 appraisal is the inheritance figure in this story.

Can Section 121 also apply?

It can, if you later own and live in the home for 2 of the 5 years before you sell. The step-up sets the basis. The exclusion, if you qualify, applies to the gain after that basis. This example does not claim the exclusion. The taxable gain stays $20,000. Read the Section 121 guide before you combine the two rules. This calculator will not assume you qualify just because the home was inherited.

What if the estate uses another valuation date?

Some estates elect an alternate valuation date. The basis is then the value on that date, not the date of death. Use the value the estate actually elected. Type that number as the basis. Do not average it with the date-of-death appraisal. Keep the election with your records. This page does not decide whether the estate was allowed to make the election.

Where is the $20,000 taxed?

On a long-term return. In this run, taxable income before the gain is $80,000, which is already above the 0% ceiling for a single filer. The $20,000 is taxed at 15%. Federal tax is $3,000. NIIT is $0 because the income is under the $200,000 single threshold. A different income changes the rate. Enter your own income in the calculator. Do not treat $3,000 as the tax on every inherited sale.

Inherited property · beginner · 8 min

Capital Gains on Inherited Property: Step-Up Basis (2026)

Updated 2026-10-12

Educational only. Not tax advice.

Short answer

You usually do not pay tax on the gain from before the owner died, because your basis resets to the value on the date of death. In this 2026 example the home is worth $400,000 at death and you sell it for $420,000. The taxable gain is $20,000, and it is long-term.

Key takeaways

The basis you type is the date-of-death value from an appraisal.
The parent's $100,000 purchase price is not the basis you enter.
The engine result is a $20,000.00 long-term gain.
Federal tax on that gain is $3,000.00 at the long-term rate.
Assets in an irrevocable trust may not get a step-up.

Before you start

Step-up in basis: A step-up sets your basis to the fair market value on the date of death. The gain before that date is not taxed to you when you sell.
Date-of-death appraisal: The basis is the value from an appraisal as of the date of death, or the alternate valuation date when the estate uses it. A guess is not the figure you type.

What step-up means

Inherited property takes a new basis. For most estates that basis is the fair market value on the date of death. You measure gain or loss from that value, not from the price the person who died paid.

The calculator does not compute a step-up. It subtracts the basis you type from the sale price. Type the appraisal. Do not type the old purchase price and expect the tool to change it.

Publication 551 is the IRS publication for basis. This page cites it. It does not replace the estate's appraisal.

The $20,000 example

A parent bought the home for $100,000. That old price is the story, not the basis. The home is worth $400,000 on the date of death. You sell it later for $420,000. The gain after death is $20,000.

Enter a basis of $400,000 and a sale price of $420,000. In this run the filer is single, taxable income before the gain is $80,000, the buy date is 15 January 2024, and the sell date is 15 June 2026. Inherited property is treated as held long-term, and these dates make the engine agree.

Taxable gain is $20,000.00. The gain type is long-term. Federal tax is $3,000.00, which is the 15% long-term rate on the $20,000. It is not the ordinary rate. NIIT is $0.00.

What you type, and what the engine returns.
Label	Amount
Parent's old purchase price, not entered	$100,000.00
Date-of-death value, entered as basis	$400,000.00
Sale price	$420,000.00
Taxable gain	$20,000.00
Federal tax at the long-term rate	$3,000.00

Stocks and homes

The same basis rule covers stock and a house. You still report a stock sale on Form 8949. A house may also raise Section 121 questions if you later live in it and meet the 2-of-5 tests. This example does not claim that exclusion.

A house and a share of stock can both use the date-of-death value. The paperwork is different. Stock needs the broker records. A house needs the appraisal and the closing statement. Write the value on the same page as the date of death. If you inherit several lots of stock, each lot can have its own value. Do not use one average for every share unless the appraisal did that. The sale of each lot is still its own Form 8949 line.

Trusts, gifts, and joint owners

Assets in an irrevocable trust may not get a step-up. Read the trust and Publication 551 before you assume the date-of-death value applies.

A gift is different. The recipient of a gift generally takes the donor's basis, with special rules when the value at the gift is lower and you later sell at a loss. A gift-versus-inheritance table is below. Do not use the gift basis for property you inherited.

Joint and community-property rules can change how much of a home gets a new basis. This page describes the idea. It does not split a deed. In a community-property state, both halves of the home can take a new basis when one spouse dies. In a common-law state, only the half that was included in the estate may change. Read the deed and the state rule before you type one number for the whole house.

Gift basis and inheritance basis are not the same rule.
How you received it	Basis you start with
Inheritance	Date-of-death value from an appraisal
Gift	Usually the donor's basis

What to document

Keep the appraisal, the date of death, and the closing statement. If the estate uses the alternate valuation date, keep that election too. The basis you type should match those papers. Store a copy with the will or the trust. You may need the number years later, when the sale happens. A photo of the appraisal is enough if the paper copy is hard to replace. The figure on that page is the figure in the calculator.

The Section 121 guide covers a later sale of a main home. This page stops at the step-up. It does not combine the exclusion with the new basis in the worked card. If you qualify for both, run a second calculation after you know the exclusion. Do not subtract the exclusion in your head and then also type a lower sale price. That would count the exclusion twice.

Worked example

$3,082.50

Long-term federal tax on the gain. NIIT is $0.00.

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