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Step-Up in Basis Calculator.

A lifetime of capital gain is erased at death. This puts a dollar figure on what that is worth — and on what handing the asset over early costs instead.

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Step-Up in Basis Calculator

Die owning an appreciated asset and the gain built up over your lifetime is never taxed — the heir’s cost basis resets to the value on the date of death. Hand the same asset over while you are alive and your old basis goes with it. This prices both, side by side.

The cost basis, plus capital improvements on a property. The number nobody can find afterwards.
For shares, the average of that day’s high and low — not the close. For a house, a written date-of-death appraisal.
Leave it level with the date-of-death value to see the step-up on its own.
Long-term gains stack on top of this, so the same inheritance costs two heirs two different amounts.
Many states tax capital gains as ordinary income and several do not tax them at all. Leave it at 0 if yours does not.
$0Tax If Inherited
$0Tax If Gifted Instead
$0Tax Saved By Inheriting
$0Gain Erased At Death
0%Effective Rate If Gifted
$0Net To Heir — Inherited
$0Net To Heir — Gifted

How the math works

Inherited: basis = value on the date of death (IRC § 1014) Gifted: basis = what the original owner paid (IRC § 1015) Gain = Sale price − basis Federal tax = the gain stacked on top of the heir's taxable income, across the 0% / 15% / 20% long-term bands NIIT = 3.8% × the lesser of the gain and income over the § 1411 floor State tax = gain × the rate you enter Tax saved by inheriting = tax on the carried-over basis − tax on the stepped-up basis

How to use it

  1. Enter what the original owner paid — the cost basis, plus capital improvements if it is a property. This is the number nobody can find afterwards. If both people are alive while you are reading this, go and write it down.
  2. Enter the value on the date of death. For listed shares that is the average of that day's high and low, not the closing price. For a house it is a written date-of-death appraisal, and getting one cheaply means getting one early.
  3. Leave the sale price equal to the date-of-death value to see the step-up on its own. Raise it to see the gain that builds up after the death, which is taxable on either route.
  4. Set the heir's filing status and other income. Long-term gains stack on top of everything else, so the same inheritance costs two different heirs two different amounts — and a modest gain can sit entirely inside the 0% band, where the step-up saves nothing at all.
  5. Read Tax Saved By Inheriting. That figure is the price of signing the asset over early instead of leaving it, and it is the entire argument for patience.

A worked example

A parent paid $30,000 for shares now worth $300,000. The heir files single, has $60,000 of other income, and sells at $300,000. Inherited, the basis resets to $300,000, the gain is $0 and the tax is $0. Gifted during the parent's lifetime, the basis stays $30,000, the gain is $270,000, and the bill is about $44,600 — roughly $39,700 of long-term capital gains tax once the gain stacks into the 15% band, plus about $4,900 of net investment income tax that the gain itself pushes the heir over the threshold for. An effective 16.5% on the gain. Same shares, same buyer, same family. The difference is which side of one day the transfer happened on.

Where this sits in the Financial Literacy resource

A calculator tells you where you are. It does not tell you what to do next, and a number without a plan behind it tends to produce anxiety rather than progress. These stages are free, need no account, and cover the decision this calculator is measuring.

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Common questions

Do you pay capital gains tax on inherited stock?

Only on what it gains after the date of death. Under IRC § 1014 your basis resets to the value on the day the previous owner died, so inheriting shares worth $180,000 and selling them for $181,000 produces a $1,000 gain, not decades of appreciation. The holding period is automatically long-term under § 1223(9) as well, so you get long-term rates even if you sell the following week.

Is it better to inherit a house or be given it before death?

Inheriting, almost always. A lifetime gift carries the giver’s original basis with it under § 1015, so the whole built-up gain is still taxable when the recipient sells. Inheriting resets the basis to the date-of-death value, which usually erases the gain outright. Adult children also cannot use the § 121 home-sale exclusion unless they owned and lived in the home for two of the previous five years. Probate can be avoided with a revocable trust or a transfer-on-death deed without giving up the step-up.

Do inherited IRAs and 401(k)s get a step-up in basis?

No. Traditional IRAs, 401(k)s, 403(b)s and non-qualified deferred annuities are income in respect of a decedent, and § 1014(c) excludes them by name. The beneficiary pays ordinary income tax on every dollar withdrawn, at their own rates, and most non-spouse beneficiaries must empty the account within ten years. This calculator models a taxable asset — stock, a fund, or property — not a retirement account.

What if the asset is worth less at death than the owner paid for it?

Then the basis steps down to the lower date-of-death value, and the unrealized loss disappears. Nobody inherits a capital loss. A loss sold and realized while the owner is alive can offset capital gains and up to $3,000 of ordinary income a year; a loss held to the end is worth nothing to anyone. The same is true of an unused capital loss carryforward — it dies with the taxpayer.

What value do I use for the date of death?

For listed stocks, funds and ETFs, 26 CFR § 20.2031-2(b) sets it as the mean between the highest and lowest quoted selling prices on that date — not the closing price. If the date fell on a weekend or a holiday, the regulation works from the nearest trading days on either side, and mutual funds are valued at that day’s net asset value instead. For real estate, a business or land, pay for a written date-of-death appraisal and do it early: reconstructing the value four years later is expensive and the answer is weaker.

What this calculator is not

It is an educational model, not a projection and certainly not advice. It knows nothing about your income, your state, your debts or your benefits status, and it ignores taxes and fees unless the page says otherwise. If you receive SSI or SSDI some of this math works differently and getting it wrong can cost you eligibility — start with the Disability Wealth Guide instead. Our sourcing and correction policy is on the editorial standards page.

Nothing here is stored. Every calculation runs in your browser. No numbers are transmitted, logged or saved to any server, and no account is required. Close the tab and it is gone.