I Just Inherited $200,000 Thinking the Step-Up Basis Would Cover My Taxes. Here’s What It Doesn’t Do.

Inheriting $200,000 does not necessarily mean you will owe taxes on the full amount. Some inherited assets receive a step-up in basis, which can reduce or eliminate capital gains taxes on growth before the owner died. This does not mean, however, that you are exempt from taxes. You could still get taxed on gains after inheriting.

What the Step-Up in Basis Covers and Leaves Out

Inherited stocks, real estate and other property generally receive a new basis tied to their fair market value on the date of death. This resets your starting point for calculating future gains or losses.

To show how the step-up in basis works, let’s break down a stock inheritance of $200,000. If your parent bought the stock for $80,000 and it is worth $200,000 when you inherit it, the step-up will generally reset the basis to $200,000. So, the $120,000 gain during your parent’s lifetime would not be subject to capital gains tax if you sold the stock at its inherited value.

This is the part of the step-up in basis that many people know, but here is what it does not cover:

A financial advisor can help identify which inherited assets receive a step-up and which can trigger taxes.

Taxes You Could Owe After Inheriting $200,000

The step-up draws a line at the inherited value, but new gains after that point can still create taxes. For example, if the stock goes up from $200,000 to $230,000 before you sell it, your capital gain would be $30,000.

Inherited capital assets are generally treated as long-term for capital gains purposes, regardless of how long you hold them. ¹ The $30,000 gain can be taxed at different rates, depending on your taxable income and filing status.

For 2026, a single filer pays 0% on long-term capital gains when taxable income is $49,450 or less, 15% when taxable income is more than $49,450 but no more than $545,500 and 20% to the extent taxable income exceeds $545,500. ² So, if your taxable income before the $30,000 already puts the entire gain within one of those ranges, here’s what you could owe:

At $15,000 in taxable income, the $30,000 gain stays within the 0% range, so no federal capital gains tax would be due. At $100,000, the gain falls within the 15% range, which would mean a $4,500 federal capital gains tax. At $550,000, the gain is taxed at 20%, for a $6,000 federal capital gains tax.

Know What You Inherited Before You Sell

Before selling inherited assets, identify how each one is taxed. Stocks and real estate generally receive a stepped-up basis, while traditional IRAs and pretax 401(k)s do not get a comparable reset. Keep records showing the date-of-death value on property with a step-up because this amount becomes the starting point used to calculate future gains.

Income generated after the inheritance can create separate tax obligations. This may include dividends, rental income and taxable distributions from inherited retirement accounts. A financial advisor could help you create a plan to manage taxes on inherited assets.

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