06/29/2026
If you inherit your parents' home, the IRS doesn't make you pay capital gains tax on the decades of appreciation they enjoyed — you get a "step-up in basis" to the home's fair market value on the date they passed away.
Here's what that means: Say your mom bought the house in 1985 for $80,000. She dies in 2026, and it's now worth $450,000. You inherit it, and your new "basis" for tax purposes becomes $450,000 — not the $80,000 she paid. If you sell it shortly after for $450,000, you owe zero capital gains tax on that $370,000 gain.
But the step-up only applies at death. Gifts during life do NOT get a step-up — the recipient keeps the original owner's basis and may owe tax on the full gain when they sell.
Here's what to do: If you're planning to transfer real estate to your kids, talk to an estate planner or tax advisor before you act. The difference between a gift and an inheritance can mean tens of thousands of dollars in tax.
Did you inherit property, or are you planning to leave a home to someone? What questions do you have about the step-up rule?
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