Step-Up in Basis Calculator

§ 1014 and § 2040 · reviewed September 6, 2026

Shows the new tax cost of an asset after a death, and how much profit is never taxed because of it. About

In plain words. When someone dies, the things they owned get a fresh tax cost equal to their value that day, so the profit that built up during their life is never taxed. How much of a jointly owned asset gets this fresh cost depends on how it was titled: all of it for something they owned alone, half for something owned jointly with a spouse in Illinois. This tool takes the original cost, the value at death, and the title, and shows the new cost and the profit that disappears.

Why it matters. It changes what a survivor should sell first and what to hold. Selling the house or the stock with the new cost may owe nothing; selling something the survivor owned alone may owe a lot.

An example. A home bought for $200,000, worth $800,000 when the first spouse dies, owned jointly: the new cost is $500,000. Half of the $600,000 profit is gone for tax purposes; the survivor's half keeps its old cost.

Where it stops. It does not cover property owned jointly with someone other than a spouse, which follows who paid for it, or retirement accounts and annuities, which never get the fresh cost. A rental property has its own adjustment for depreciation. Everything it leaves out.

What it cost

The purchase price plus improvements, minus any depreciation taken. This is its basis, the starting figure for measuring gain.

What it was worth at death

Its market value on the day the owner died. An appraisal or a broker's estimate is the usual source.

How it was held

Held by the two spouses together, with the survivor taking the whole. Half of it steps up.

Price of a later sale

What the survivor might sell it for later, to see the gain they would report then.

The asset's new basis after the death

$500,000

50% of the asset now takes its value at death as its basis, the starting figure for measuring gain. That wipes out $300,000 of gain that would otherwise have been taxed on a sale. The survivor's own 50% share keeps its old basis.

Gain wiped out by the step-up: $300,000; Out of $600,000 of gain built up before the death
Gain taxed on a sale at $850,000: $350,000; It would be $650,000 without the step-up
Capital gains tax saved on that sale: $45,000 to $71,400; At the 15% rate, or at 20% plus the 3.8% investment surtax

Property received from someone who has died takes its value at death as its new basis. The only question is how much of the asset that rule reaches, and the answer follows how the asset was titled. If the survivor later sells a home, the home-sale exclusion may also apply. The married amount of that exclusion is available for up to two years after the death.

This follows the federal rule that gives inherited property a new basis equal to its value at death, and the rule for property held jointly. A joint asset held with someone other than a spouse steps up by the share the deceased paid for, not by the title. It leaves out IRAs, 401(k)s, and annuities, which get no step-up, along with the alternate valuation date, depreciation recapture, state tax, and the home-sale exclusion. Illinois is not a community property state, so a couple's joint asset steps up by half. Educational, not advice.

This is a simplified model, not your actual tax return or plan. It only knows what you type in, leaves out rules that may apply to you, and cannot weigh the other facts and trade-offs a real decision depends on. Before you act, talk with a professional who knows your whole situation.

Educational only, not investment, tax, or legal advice. Results are hypothetical estimates that vary with each use and over time and are not guaranteed accurate or complete. Using this tool creates no client relationship with Considerate Capital, and the site that linked here is not affiliated with it. By using it you agree to the tool terms.