Quick answer: When you inherit a home, its tax basis is generally “stepped up” to the property’s fair market value on the date the owner passed away. A professional date-of-death appraisal documents that value, which can significantly reduce the capital gains tax you owe if you sell later.
What Is a Stepped-Up Cost Basis?
Cost basis is, in simple terms, what you are considered to have paid for a property. If you buy a home for $200,000 and later sell it for $500,000, your taxable gain is generally the $300,000 difference.
Inherited property is treated differently. Under federal tax law, the basis of property you inherit is generally reset to its fair market value on the date of the previous owner’s death. A home bought decades ago for $60,000 and worth $600,000 on the date of death passes to the heirs with a basis of $600,000, not $60,000. If the heirs sell soon afterward for about that amount, there may be little or no taxable gain. In some cases the basis is “stepped down,” if the property had lost value.
Why a Date-of-Death Appraisal Matters
The step-up is only as strong as the value behind it. If the IRS or a state tax agency ever questions the basis you used, you need support that holds up. A tax assessment, an online estimate, or a real estate agent’s opinion of value generally does not carry the same weight as a signed appraisal prepared by a licensed appraiser.
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Capital gains protection: a documented value at the date of death sets your starting point for any future sale.
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Estate tax reporting: when an estate is large enough to require a federal estate tax return, the reported values matter, and heirs are expected to use consistent basis figures.
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New York and Connecticut: both states have their own estate taxes, with thresholds well below the federal level, so many local families need a defensible value even when no federal return is due.
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Fair division among heirs: an independent value helps executors and beneficiaries buy out, sell, or split a property without disputes.
How a Retrospective (Date-of-Death) Appraisal Works
You usually do not think about an appraisal until weeks or months after the death, and that is fine. A date-of-death appraisal is retrospective: the appraiser inspects the property as it is today, then researches the sales that were available and the market conditions as of the date of death. The report states the value on that specific date, using comparable sales from the same period.
The sooner it is ordered, the better. Records are fresh, the property is less likely to have been changed or renovated, and the executor can settle the estate with the value already in hand.
What You Get from Hudson View Appraisal Services
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A certified residential appraisal with a clearly stated effective date, the date of death.
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A neutral, well-supported value from an appraiser with 30 years of experience.
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Expert testimony if the value is ever challenged.
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Most reports within about a week, serving Westchester, Putnam, Rockland, Orange and Dutchess Counties in New York and Fairfield County, Connecticut.
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Learn more about our probate and date-of-death appraisals.
Get Started
If you are an executor, trustee, heir, or estate attorney, call (914) 289-2911 or request an appraisal online. We are open 9 AM to 7 PM, seven days a week.
This article is general information, not tax or legal advice. Rules on basis, estate tax, and valuation dates vary by situation. Please confirm how they apply to you with your CPA or estate attorney.
