CalculateRealEstateROI

Taxes

How does step-up basis work for real estate?

Heirs inherit property at fair market value, eliminating built-in gain and depreciation recapture.

Reviewed by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Direct answer

Heirs inherit property at fair market value, eliminating built-in gain and depreciation recapture.

Expanded explanation

Hold-until-death strategy. Refinance for cash needs instead of selling. Strategy widely used by real-estate dynasties to compound multi-generationally.

Examples

  • $1M property with $400k basis → heirs inherit at $1M, zero tax on $600k gain.

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