Beneficiary Tax Impact Calculator
Free beneficiary tax impact calculator. Estimate federal and state taxes on inherited assets including retirement accounts, stocks, and real estate.
Step-Up in Basis Calculator
Free step-up in basis calculator. Estimate capital gains tax savings from the stepped-up cost basis on inherited assets at date of death.
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$
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Net Investment Income Tax (3.8% for high earners)
%
$
Tax Savings from Step-Up⧉
$135,660.00
Combined rate: 23.80%
Unrealized Gain Eliminated⧉
$570,000.00
712.50% appreciation over basis
New Stepped-Up Basis⧉
$650,000.00
Heir's new cost basis = FMV at death
Heir's Tax If Sold at Future Price⧉
$0.00
Tax on post-step-up appreciation only
Total Heir Tax Savings⧉
$135,660.00
Compared to selling without step-up
Total Appreciation⧉
712.50%
Original basis → FMV at death
Basis vs. Fair Market Value
Original Basis: $80,000.00FMV: $650,000.00
12.30% of FMV
Unrealized gain of $570,000.00 eliminated at death
Tax Savings Breakdown
| Tax Component | Rate | Tax Saved | Visual |
|---|---|---|---|
| Federal Capital Gains Tax Saved | 15.00% | $85,500.00 | |
| State Income Tax Saved | 5.00% | $28,500.00 | |
| Net Investment Income Tax Saved | 3.80% | $21,660.00 | |
| Total | 23.80% | $135,660.00 |
Transfer Strategy Comparison
| Strategy | Heir's Basis | Taxable Gain | Tax Owed |
|---|---|---|---|
| Sell Before Death (No Step-Up) | $80,000.00 | $570,000.00 | $135,660.00 |
| Inherit + Sell Immediately | $650,000.00 | $0.00 | $0.00 |
| Inherit + Hold (basis = FMV) | $650,000.00 | $0.00 | $0.00 |
| Gift During Lifetime (carryover basis) | $80,000.00 | $570,000.00 | $135,660.00 |
Planning notes, formulas, and examples
About the Step-Up in Basis Calculator
When you inherit most assets (real estate, stocks, bonds), the cost basis resets ("steps up") to the fair market value on the date of the decedent's death. This eliminates capital gains tax on all appreciation that occurred during the decedent's lifetime, potentially saving beneficiaries thousands or even millions in taxes.
This is one of the most valuable tax benefits in estate planning. For example, if someone purchased stock for $50,000 that is worth $500,000 at death, the beneficiary's new basis is $500,000 — the entire $450,000 gain is never taxed.
This calculator estimates the capital gains tax savings from the stepped-up basis on inherited assets.
When This Page Helps
Understanding the step-up in basis helps families compare sale timing, estate structures, and the tax consequences of inherited assets. This worksheet is for planning, not tax advice.
How to Use the Inputs
- Enter the original cost basis of the asset.
- Enter the fair market value at date of death.
- Enter your applicable capital gains tax rate.
- View the tax savings from the stepped-up basis.
- Compare selling now vs. holding.
Formula used
Unrealized Gain = Fair Market Value at Death − Original Cost Basis
Tax Savings = Unrealized Gain × Capital Gains Tax Rate
New Basis for Beneficiary = Fair Market Value at Date of DeathExample Calculation
Result: $90,000 tax savings
Unrealized gain: $500,000 − $50,000 = $450,000. At 20% capital gains rate (including NIIT): $450,000 × 20% = $90,000 in tax that is completely eliminated by the step-up in basis.
Tips & Best Practices
- The step-up applies to stocks, bonds, real estate, and most other capital assets.
- Retirement accounts (IRAs, 401ks) do NOT receive a step-up in basis.
- Community property states may provide a full step-up on jointly held property.
- Selling inherited assets immediately usually results in little to no capital gains.
- Consider holding inherited assets with continued growth potential — future gains start from the new basis.
- Get a formal appraisal on the date of death for real estate and business interests.
Step-Up vs. Carryover Basis
Assets received at death get a stepped-up basis. Assets received as gifts carry over the donor's original basis. This distinction is critical: a $100,000 stock worth $1M is better inherited (new $1M basis) than received as a gift ($100,000 carryover basis).
Planning Around the Step-Up
Consider holding highly appreciated assets until death for the step-up benefit. For assets with losses, it may be better to sell before death to capture the loss. Charitable giving of appreciated assets provides a deduction and avoids gains entirely.
Documentation Requirements
Beneficiaries should obtain formal valuations for all inherited assets. For real estate, get a professional appraisal as of the date of death. For securities, record the closing price. Proper documentation protects you if the IRS questions your basis.
Sources & Methodology
Last updated:
Methodology
This page is a basis-planning worksheet, not a tax opinion. It compares original basis to fair-market value at death and applies the capital-gains rate you enter to estimate the tax savings from the step-up. The worksheet is meant for scenario comparison, not for determining the correct basis for a specific inherited asset.
Sources
- Publication 551 (12/2025), Basis of Assets (Internal Revenue Service) — Official IRS guidance on basis, including property acquired from a decedent.
- Estate tax (Legal Information Institute, Cornell Law School) — General background on estate tax coordination with basis-at-death planning.
Frequently Asked Questions
Most capital assets receive a step-up: stocks, bonds, mutual funds, real estate, personal property, and business interests. Notable exceptions include retirement accounts (IRAs, 401ks), which do not receive a step-up and are instead taxed as ordinary income.
No. However, selling immediately locks in the stepped-up basis with minimal gain. If you hold the asset, only post-death appreciation is subject to capital gains tax. The decision depends on the asset's future prospects and your investment goals.
In community property states, both halves of jointly held community property receive a full step-up when one spouse dies. In common law states, only the decedent's half receives a step-up. This makes community property highly advantageous for tax purposes.
Congress periodically proposes eliminating the step-up. So far it has survived. The Biden administration proposed replacing it with carryover basis (inheriting the original basis), but the proposal did not pass. Any change would significantly impact estate planning.
For publicly traded securities, use the average of the high and low price on the date of death. For real estate and private assets, a professional appraisal is needed. The executor may also elect an alternate valuation date (6 months after death).
No. Gifts during lifetime carry over the donor's original basis (carryover basis). Only assets transferred at death receive the step-up. This is why it is sometimes better to hold appreciated assets until death rather than gifting them.
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