04/14/2026
📋 The stepped-up basis resets an inherited home's tax cost to its fair market value on the date of the owner's death.
If you sell shortly after inheriting, capital gains are often near zero because there is little or no gain above that reset value.
Long-term capital gains rates are 0%, 15%, or 20% at the federal level, with an additional 3.8% net investment income tax for high earners.
An appraisal at the time of inheritance typically costs $300 to $600 and is the single strongest piece of evidence if the IRS later questions your basis.
The original homeowner's insurance policy often terminates at death. A vacancy or estate policy is needed immediately to avoid a coverage gap.
Five states impose a separate inheritance tax: Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Twelve states and D.C. also impose estate taxes with exemptions as low as $1 million.
If you rent the property, you can depreciate the structure over 27.5 years. That depreciation reduces your stepped-up basis over time, increasing the taxable gain when you eventually sell.
The federal estate tax exemption in 2026 is $15 million per individual. Most inherited homes will not trigger federal estate tax, but state thresholds can be far lower.
Probate can take 6 to 18 months depending on the state. Properties held in a revocable trust skip probate entirely.
