Definition
What is step-up in basis?
A step-up in basis resets the cost basis of an inherited asset to its fair market value on the date of the original owner’s death. This can eliminate capital-gains tax on all the appreciation that occurred during the owner’s lifetime if the heir sells the asset shortly after inheriting it.
For example, if a parent bought stock for $50,000 that is worth $400,000 at their death, the heir’s cost basis “steps up” to $400,000 — so selling near that price generates little or no capital-gains tax.
The step-up is a central consideration in estate and legacy planning, and it can change whether it makes sense to sell an appreciated asset during your lifetime or hold it to pass on.
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This definition is for educational purposes only and does not constitute investment, tax, or legal advice. Rules and thresholds change; consult a qualified professional about your situation.