When it comes to real estate and inheritance, the step-up tax basis plays a crucial role in determining tax liabilities. This provision can significantly impact how much you—or your heirs—owe when selling a property acquired through inheritance. The TJS Team, led by Tina Jingru Sui, breaks down the concept, its benefits, and why it matters for homeowners, investors, and families in Atlanta and nearby areas like Duluth, Suwanee, Dacula, Buford, Alpharetta, and Johns Creek.
1. What is the Step-Up Tax?
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Original Purchase Price: Parents bought a home in Duluth for $150,000
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Fair Market Value at Inheritance: $500,000
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Step-Up Basis: Property’s value is reset to $500,000 for tax purposes
Without this adjustment, you’d owe taxes on the $350,000 increase—even though you didn’t benefit from that appreciation.
2. Benefits of the Step-Up Tax
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Reduced Capital Gains Taxes – Minimizes the taxable gain when you sell inherited property, potentially saving thousands.
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Simplifies Estate Planning – Allows heirs to manage inherited assets without large, immediate tax burdens.
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Maximizes Inheritance Value – Heirs retain more of the property’s value, enhancing the financial benefits of inheritance.
3. Who Benefits?
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Heirs and Families: Those inheriting homes or rental properties in Dacula, Buford, or Johns Creek.
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Real Estate Investors: Investors inheriting income-producing properties can reduce taxes while benefiting from rental income.
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Sellers of Inherited Properties: Selling inherited property in Alpharetta or Duluth means you only pay taxes on gains accrued after inheritance.
4. Common Misconceptions
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It’s Not a Tax Exemption: Step-up basis reduces taxable amount but doesn’t eliminate taxes entirely.
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Not Applicable to Gifts: Only inherited properties qualify; gifts during the owner’s lifetime do not.
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Estate Value Matters: Most estates qualify, but very large estates may face additional federal estate tax implications.
5. How to Calculate Step-Up Basis
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Determine Fair Market Value: Get a professional appraisal at the time of inheritance.
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Account for Improvements: Include major post-inheritance improvements to adjust the basis.
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Work with Experts: Consult a tax advisor to ensure IRS compliance and accurate calculations.
6. Why Understanding Step-Up Basis is Crucial
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For Inheritors: Helps make informed decisions about selling or keeping inherited property in Duluth, Alpharetta, or Suwanee.
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For Estate Planners: Ensures heirs maximize inheritance value while minimizing taxes.
How the TJS Team Can Help
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Local Market Insights: Understand property values in Atlanta suburbs.
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Trusted Referrals: Connect with estate planners and tax professionals for guidance.
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Expert Guidance: We help you make the most of inherited properties, whether selling or holding.
Inherited a property and need guidance? Contact Tina Jingru Sui – TJS Team to navigate Duluth, Suwanee, Dacula, Buford, Alpharetta, and Johns Creek real estate and maximize your inheritance today!
