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How Inherited Property Can Save You Thousands in Taxes: The Power of the Step-Up in Basis
If you’ve inherited a home — or you’re planning how to pass one down — there’s a tax rule that could save you (or your heirs) a small fortune: the “step-up in basis.”
As real estate professionals, we’re not tax advisors. But we are here to make sure you understand the rules that can protect your wealth and help you make smart, informed decisions.
What Is a Step-Up in Basis?
When you inherit real estate, the IRS “steps up” the property’s tax basis — meaning its official value for capital gains purposes — to the fair market value on the date of the previous owner’s death.
Why does this matter? Because capital gains taxes are calculated on the difference between the basis and the selling price. A higher basis means a smaller taxable gain.
Example: How It Works
Let’s say your father bought a home in 1990 for $150,000. He passes away in 2025, and the home is now worth $650,000.
You inherit it with a stepped-up basis of $650,000. If you sell the property a month later for $655,000, your taxable gain is only $5,000 — not the $505,000 difference from the original purchase price.
Avoid This Costly Mistake: Don’t Gift It Early
Many people think gifting property during their lifetime will help their children avoid taxes. In reality, it often increases the tax bill.
When property is gifted, the recipient keeps the original basis, not a stepped-up one. That means a much larger taxable gain when it’s sold. If your goal is to pass wealth efficiently, inheritance is usually the smarter choice.
How We Can Help
While we leave the legal and tax details to your CPA or estate planning attorney, we know enough to help you recognize when the step-up in basis could apply — and when to pause before making a decision.
We help you:
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Understand the potential tax impact of selling an inherited property.
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Connect you with trusted tax and legal professionals.
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Market inherited homes with a tax-smart strategy.
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Avoid costly mistakes that can drain your estate’s value.
If you’ve inherited a home, or you’re helping a loved one plan their estate, the step-up in basis could save you tens — or even hundreds — of thousands of dollars. But only if it’s handled correctly.
Contact me anytime for guidance, referrals to experts, or help evaluating your options. My goal isn’t just to sell your home — it’s to help you protect and grow your family’s long-term wealth through smart real estate decisions.
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