The “Step Up” Tax and How it Works

Stepped-up basis is a tax law that applies to estate transfers. When someone inherits investment assets, the IRS resets the asset’s original cost basis to its value at the date of the inheritance. The heir then pays capital gains taxes on that basis. The result is a loophole in tax law that reduces or even eliminates capital gains tax on the sale of these inherited assets.

To see how this applies in real estate, check out this video https://youtu.be/2OSQTBiUmU0

Estate Tax Planning Tips

  • A financial advisor can be a great partner in managing the tax implications of your estate plan. Finding the right financial advisor who fits your needs doesn’t have to be hard.
  • The stepped-up basis loophole is just one thing to keep in mind when planning an estate. Another key topic is estate taxes.  Further, it’s important to understand how estate planning differs from legacy planning. 

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