How Does Step-Up in Basis Work in Montana?

Inherited assets in Montana take a basis reset to fair market value on the date of death, and the gain on a later sale faces the state's preferential capital gains rates.

Your State

Fair Market Value at Death

What the person who died paid for it

Sale Price

Who owned it?

The person who died owned it aloneWith you, as spousesWith someone else

Your Filing Status

Your Other Taxable Income

Tax Year of the Sale

Calculate the step-up in basis

Enter the asset's value when the person died, what they paid for it and your own tax details to see the new basis, the federal and Montana tax on a sale and what the step-up saves.

Examples:

General information about stepped-up basis and capital gains tax on inherited property, not tax or legal advice. Basis follows IRC § 1014. Consult a licensed tax professional for tax questions. Data verified Sep 20, 2026

When someone dies, the cost basis of the property they leave is reset to its fair market value on the date of death under IRC § 1014. A later sale is taxed on the gain above that stepped-up basis, not above what the original owner paid, so the appreciation of the owner's lifetime is never taxed. The rule is federal and applies in Montana as in every state.

State capital gains tax is a separate layer from the federal tax. After the step-up, the gain on a later sale faces the state's preferential capital gains rates. The step-up still matters: it sets the gain on which both the federal and the state tax are figured.

For the capital gains tax, inheriting is usually better than receiving a lifetime gift. Inherited property takes a basis reset to fair market value at death under IRC § 1014; a gift carries the donor's original basis under IRC § 1015. Stock bought for $10,000 and worth $200,000 carries a $190,000 gain to the recipient of a gift and none to an heir. Property held in a revocable living trust still receives the step-up at the grantor's death.

No. Inherited property is treated as held long-term from the date of death under IRC § 1223(9), whatever the actual holding period, so a sale the day after the inheritance is taxed at the federal long-term rates of 0%, 15%, or 20% on any gain above the stepped-up basis, plus the Montana layer. Short-term ordinary-income rates never apply.

The new basis is the fair market value on the date of death, and IRS Publication 551 sets the standard for each asset class: for a publicly traded security the average of the high and low prices that day, for real estate a qualified appraisal as of that date, for a privately held business interest an independent valuation (required where a federal estate tax return is filed). The valuation is what substantiates the basis on Schedule D when the heir sells.

Step-Up in Basis in Montana

Step-up in basis is a federal rule that applies to inherited assets in every state, including Montana. When someone dies, the cost basis of property they leave to heirs is reset to fair market value on the date of death. If the heir later sells, capital gains tax is calculated against this stepped-up basis instead of what the original owner paid. For appreciated assets held for years or decades, the step-up can eliminate most or all of the gain.

Montana applies preferential rates to long-term capital gains that are lower than the ordinary income rates at the same income levels: after the step-up, the gain on a later sale faces the state's preferential capital gains rates. After the step-up reduces the gain, these rates further lower what Montana residents owe on inherited-asset sales.

For Montana families, the step-up in basis is one of the strongest tax reasons to inherit appreciated property rather than receive it as a gift during life, since a gift carries the donor's original basis. A Montana revocable living trust preserves the step-up — assets held in the trust during life still receive the basis adjustment at death — while avoiding the probate process that a will alone triggers.