Step-Up Basis at Death Calculator: When NOT to Sell Appreciated Assets

The single biggest tax break in the US code, for assets held to death

Under IRC §1014, an inherited asset's cost basis is RESET to its fair market value at the date of the original owner's death. All the unrealized appreciation accumulated over decades disappears for tax purposes. The heir who sells immediately owes essentially zero capital-gains tax. For a stock position bought decades ago that has 10×'d, or the family home that has 5×'d since purchase, the step-up wipes out hundreds of thousands of dollars of phantom tax.

The planning move follows: if you're elderly, sitting on highly-appreciated assets, and have other resources to live on, holding to death often beats selling now. Both paths grow at the same rate over your remaining lifetime — but the sell-now path starts with less principal (current value minus the LTCG tax). The step-up advantage works out to exactly the LTCG tax you would have paid today, compounded by the same growth factor over the years remaining. On a $1M position with $200K basis at 15% LTCG, holding 15 years at 6% growth gives heirs about $290K more than selling-and-investing-the-net would.

How the math works

1. Unrealized gain = currentValue − costBasis.
2. LTCG tax if sold now = gain × your federal LTCG rate (0%, 15%, or 20%).
3. Sell-now-and-invest future value = (currentValue − LTCG tax) × (1 + growth)^years.
4. Value at death (stepped-up basis) = currentValue × (1 + growth)^years.
5. Step-up advantage = valueAtDeath − sellNowFV = LTCG tax × (1 + growth)^years.

Sources: IRC §1014 (basis of property acquired from a decedent), IRS Pub 559 on the executor's basis-step-up procedure, IRS Pub 550 for LTCG bracket thresholds (0% / 15% / 20% in 2025).

What this simplifies: assumes you don't NEED to spend the holding during your remaining lifetime. If you'd have to liquidate part for living expenses, the sell-now path captures some of the spend-down. The model also doesn't account for state estate tax (large estates may owe state tax on the held position even though §1014 preserves federal LTCG savings) or the 3.8% NIIT on the sell-now path for high-MAGI taxpayers.

Math runs locally. Inputs never leave your browser. Source on github.

Where this calculation doesn't apply

• You need the money. The step-up only matters if the asset is held until death. If you'd liquidate any portion for living expenses, that part doesn't get the step-up. Optimal: hold the appreciated position, spend down cash and lower-basis holdings first.
• You're younger than ~70. The model rewards long holding periods, but for someone with 30+ years remaining, the "concentrated position risk" of holding decades may not be worth the step-up's eventual value. Step-up planning is mostly a 70+ consideration.
• The asset is in an IRA / 401(k). §1014 step-up applies to TAXABLE accounts. Inherited IRAs don't get a step-up — distributions are still taxed as ordinary income. See the Inherited IRA RMD tool.
• Concentrated-position risk. The model assumes both scenarios grow at the same rate. Holding a single appreciated stock for 15 years carries real concentration risk — diversification benefits may outweigh the step-up advantage at some point.
• Charitable bequest planning. If you plan to give the appreciated asset to charity at death, it gets the FMV deduction with no capital-gains tax — same outcome as step-up for the donor, no tax for the charity. Even better than step-up to heirs.

What to actually do

1. Identify your most-appreciated taxable positions. The lower the basis relative to current value, the bigger the step-up advantage.
2. If you have appreciated AND non-appreciated holdings of similar dollar value, sell from the non-appreciated ones first for living expenses. Preserve the appreciated ones for the step-up.
3. Don't gift highly-appreciated assets to children during your lifetime — the recipient inherits your COST BASIS, not the stepped-up basis. Step-up is a death-only event.
4. For massively appreciated positions where concentration risk is real, consider partial gradual sells (LTCG harvesting in 0% bracket years if possible) rather than holding 100% to death.
5. Coordinate with charitable giving plans — if you're donating at death anyway, the appreciated asset bequest is the highest-leverage way to do it.