Step-Up in Basis: What It Means for You

When you inherit assets like a house or stocks, you also get a valuable tax break called a step-up in basis. 

This rule adjusts the asset’s original purchase price (its “basis”) to its value at the time of the previous owner's death.

For example, if your parent bought a home for $100,000 and it’s worth $400,000 when you inherit it, your new basis is $400,000. 

If you sell it for that amount, you owe no capital gains tax.

This rule applies to many inherited assets—real estate, stocks, mutual funds, and more—but not to retirement accounts like IRAs or to assets given as gifts during someone’s lifetime.