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The gain that dies with the owner.

An asset inherited at death takes its value that day as its cost. How much of a jointly held home or account that reaches depends on the title. Enter the cost, the value, and how it was held, and see the new basis and the gain that is gone.

§ 1014 and § 2040; Illinois is a common-law state · Last reviewed September 6, 2026 · Facts · The table · Methodology

https://consideratecapital.com/tools/step-up-in-basis-calculator

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.

Built by Joshua Mangoubi, CFA, MBA. By using this tool you agree to the tool terms, which include that results vary with each use and over time. Cite this tool, or take a table or chart

How it counts. The fraction that steps up follows the title (all, half, the decedent's share, or none), from § 1014 and § 2040; the new basis is the old basis on the rest plus the date-of-death value on that fraction; the gain at a later sale is computed both ways.

What it assumes. A qualified joint interest between spouses, a community-property state where that is chosen, and no depreciation, alternate valuation, or home-sale exclusion. A joint tenancy with a child or sibling follows who paid for it, and a rental has recapture; both are an attorney's or a CPA's question, and the deadline for choosing alternate valuation is the estate return's.

Where we fit in. We integrate tax considerations into your investment strategy and collaborate with estate attorneys and CPAs to ensure your plan is coordinated. We are not a law firm or accounting firm, so we do not provide legal or tax advice. Everything in this material is for educational purposes, based on primary sources. Before taking any action, please consult the appropriate professionals to apply these ideas to your situation.

The facts, in one place.

Six quotable sentences on the step-up in basis.

Property acquired from a decedent takes as its basis the fair market value at the date of death (§ 1014(a)(1)); the gain that accrued during the decedent's life is never taxed. The same rule steps a basis down when the value fell.
What steps up is the part of the asset that was the decedent's for estate purposes. An asset the decedent owned alone steps up in full; the survivor's own separate property does not step up at all.
A qualified joint interest between spouses (joint tenancy with right of survivorship, or tenancy by the entirety) is included in the decedent's estate as to one-half (§ 2040(b)), so one-half of the asset steps up and the survivor's half keeps its old basis (§ 1014(b)(9)).
Example: a home bought for $200,000, worth $800,000 at the first spouse's death, held jointly. The new basis is $500,000; $300,000 of gain disappears, and a sale at value leaves $300,000 of gain for the survivor (before the home-sale exclusion).
In a community property state, both halves step up when at least half the property was includible in the decedent's estate (§ 1014(b)(6)). Illinois is not one; a couple's joint assets in Illinois are qualified joint interests, and only the decedent's half steps up.
A joint tenancy with someone other than a spouse is included in the decedent's estate in full unless the survivor can show what they paid (§ 2040(a)), so the stepped-up fraction follows the contribution, not the title.

What steps up, by title.

Each form of ownership and the share that steps up.

The fraction of an asset that takes the date-of-death value, by form of ownership (§ 1014; § 2040)
How the asset was held	Included in the decedent's estate	Steps up	Authority
By the deceased alone	All	All	§ 1014(a)(1)
Joint with the surviving spouse (right of survivorship, or by the entirety)	One-half	One-half	§ 2040(b); § 1014(b)(9)
Community property (not Illinois)	One-half	All, both halves	§ 1014(b)(6)
Tenancy in common	The decedent's share	The decedent's share	§ 1014(a)(1)
Joint with someone other than a spouse	All, less what the survivor proves they paid	The included part	§ 2040(a); § 1014(b)(9)
By the survivor alone	None	None	§ 1014
An IRA, 401(k), or annuity (income in respect of a decedent)	All	None: no step-up	§ 1014(c)

How the step-up works.

Property acquired from a decedent takes as its basis the fair market value at the date of death. That is the whole rule, and it means the gain that built up during the decedent's life is never taxed to anyone. What the rule reaches is a question of title: an asset the decedent owned alone is acquired from the decedent in full; an asset held jointly with a spouse is acquired from the decedent as to the decedent's half, because that is the half the estate tax includes; the survivor's own separate property is not acquired from the decedent at all.

Community property is the exception that proves the rule: both halves step up, because the statute says so. Illinois is not a community property state, so an Illinois couple's jointly held home or brokerage account steps up by half at the first death and in full at the second. Retirement accounts and annuities never step up; their untaxed income is income in respect of a decedent and is taxed to whoever receives it.

Methodology.

Inputs. The cost basis, the fair market value at death, how the asset was held (and, for a tenancy in common, the decedent's share), and a later sale price.
The fraction. All for an asset the decedent owned alone (§ 1014(a)(1)); one-half for a qualified joint interest between spouses (§ 2040(b) includes one-half; § 1014(b)(9) steps up what is included); all for community property (§ 1014(b)(6)); the decedent's share for a tenancy in common; none for the survivor's own property.
The new basis. The old basis on the part that does not step up plus the date-of-death value on the part that does. The gain erased is the unrealized gain times the fraction; a fall in value steps the basis down by the same rule.
The sale. Gain at the later sale price against the new basis and against the old one; the tax saved is the difference at 15 percent, and at 20 percent plus the 3.8 percent surtax.
Validation. A joint asset stepping up by half, community property in full, a quarter-share tenancy in common, the survivor's own property unchanged, and a step-down. A transcription error fails the build.
Not modeled. Joint tenancy with someone other than a spouse (the contribution rule of § 2040(a)), the alternate valuation date, depreciation recapture on a rental, the home-sale exclusion, income in respect of a decedent, and state tax. Educational, not advice.

Sources.

1. United States Code (Cornell LII), 26 U.S.C. § 1014 — Basis of property acquired from a decedent. That property acquired from a decedent takes the fair market value at the date of death as its basis (a)(1); that the surviving spouse's half of community property takes it too when at least half the property was includible in the decedent's estate (b)(6); and that property included in the gross estate by reason of its form of ownership, such as a joint tenancy, is treated as acquired from the decedent (b)(9). Retrieved September 6, 2026; verified September 6, 2026.
2. United States Code (Cornell LII), 26 U.S.C. § 2040 — Joint interests. That one-half of a qualified joint interest between spouses (tenancy by the entirety, or a joint tenancy with right of survivorship held only by the two) is included in the decedent's gross estate (b); and that a joint tenancy with anyone else is included except to the extent the survivor can show they furnished the consideration (a). Retrieved September 6, 2026; verified September 6, 2026.
3. Internal Revenue Service, Publication 551, Basis of Assets — Inherited property; property held by a surviving spouse; community property. The Service's plain statement of the rules: inherited property's basis is its fair market value at death; for qualified joint interests only the decedent's half is adjusted; in a community property state the whole property is. Retrieved September 6, 2026; verified September 6, 2026.

Revision history.

The record's history.

September 6, 2026: First release: the new basis by form of ownership (sole, joint with a spouse, community property, tenancy in common, survivor's own), the gain that disappears, and the tax on a later sale.

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