Step-Up Basis Calculator

Compare capital gains tax on gifted assets against inherited step-up basis.

About Step-Up Basis Calculator

Gifting appreciated assets transfers the original basis, so the recipient inherits the entire unrealised gain. Inheriting instead resets the basis, eliminating tax on appreciation during the owner's lifetime. This is why highly appreciated assets are generally best held until death and cash or low-basis assets gifted instead, where estate tax is not a binding concern.

Formula

Step-Up Basis

Gifted assets keep the original basis; inherited assets step up to market value at death

step-up basis: Cost basis reset to market value at the date of death
carryover basis: The original basis, which follows a gifted asset to the recipient

Worked example

With the default values below, Step-Up Basis Calculator returns Tax Saving From Step-Up Basis of $72,000.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Original cost basisminimum 0: 120,000
Current market valueminimum 0: 480,000
Capital gains tax rateaccepts 0–50 %: 20 %
Estate tax rate if applicableaccepts 0–60 %: 0 %
Years until saleminimum 0 years: 5 years
Annual appreciationaccepts -10–20 %: 5 %

Results

Tax Saving From Step-Up Basis: $72,000.00
Capital Gains Tax if Gifted and Sold: $98,523.03
Capital Gains Tax if Inherited Then Sold: $26,523.03
Projected Value at Sale: $612,615.15
Unrealised Gain Today: $360,000.00

Step by step

1Values used
2Step-Up Basis
3Tax Saving From Step-Up Basis= 72,000.00
4Capital Gains Tax if Gifted and Sold= 98,523.03
5Capital Gains Tax if Inherited Then Sold= 26,523.03
6Projected Value at Sale= 612,615.15
7Unrealised Gain Today= 360,000.00

Assumptions and limits

The result is derived only from the 6 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation into account.
Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
This is a general illustration, not financial, tax or legal advice. Rules, thresholds and rates vary by jurisdiction and change frequently, and individual circumstances materially affect outcomes. Consult a qualified adviser before making any decision based on these figures.
This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

This is a general illustration, not financial, tax or legal advice. Rules, thresholds and rates vary by jurisdiction and change frequently, and individual circumstances materially affect outcomes. Consult a qualified adviser before making any decision based on these figures.

Frequently Asked Questions

How is Step-Up Basis calculated?

Gifted assets keep the original basis; inherited assets step up to market value at death Gifting appreciated assets transfers the original basis, so the recipient inherits the entire unrealised gain. Inheriting instead resets the basis, eliminating tax on appreciation during the owner's lifetime.

Why does Step-Up Basis matter?

This is why highly appreciated assets are generally best held until death and cash or low-basis assets gifted instead, where estate tax is not a binding concern.

What values do I need to enter?

This calculator takes 6 inputs: Original cost basis, Current market value, Capital gains tax rate, Estate tax rate if applicable, Years until sale, Annual appreciation. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.