How Does Step-Up in Basis Work in New Hampshire?

After the federal step-up, only the state layer differs by jurisdiction. New Hampshire does not tax capital gainsNH RSA ch. 77 (Taxation of Incomes — Interest & Dividends Tax) — "Chapter 77 Repealed – Entire Chapter was repealed [Repealed by 2021, 91:189, II, eff. Jan. 1, 2025.]"Verified Jul 14, 2026. There is no general state income tax and no separate tax on long-term capital gains. Federal capital gains tax still applies, but no state-level tax is owed on the gain.

For tax purposes, inheriting assets is usually better than receiving them as a lifetime gift. Inherited property gets a step-up in basis to fair market value at death under IRC § 101426 USC § 1014Verified Jul 13, 2026; gifted property carries the donor's original basis under IRC § 101526 USC § 1015(a)Verified Jul 13, 2026. If the donor bought stock at $10,000 that's now worth $200,000, a recipient who sells after a gift owes capital gains tax on the full $190,000 of appreciation. The same recipient inheriting the same stock owes tax only on appreciation after the date of death. A revocable living trust preserves the step-up — assets held in the trust during life still receive the basis adjustment at death.

Under IRC § 1223(9)26 USC § 1223(9)Verified Jul 13, 2026, inherited property is automatically long-term in the heir's hands — the holding period is deemed to satisfy the more-than-one-year requirement at the moment of death. A beneficiary in New Hampshire who sells the day after inheriting still gets long-term federal rates of 0%, 15%, or 20% on any gain (IRC § 1(h))IRC § 1(h); IRS Topic No. 409Verified Jul 13, 2026. Short-term ordinary-income rates do not apply.

Each asset class has its own valuation standard (IRS Pub. 551)26 USC § 1014(f), § 6035; IRS Pub. 551 (Basis of Assets); Form 8971 / Schedule AVerified Jul 13, 2026. Publicly traded securities take the average of the high and low trading prices on the date of death. Real property requires a qualified appraisal as of that date. Privately held business interests need an independent appraisal — required if Form 706 is filed and best-practice in any case. The records substantiate the stepped-up basis when the heir later reports the sale on Schedule D.

AVD — short for alternate valuation date — is an option under IRC § 2032§ 1014(a)(2); § 2032(a)Verified Jul 13, 2026 to value the estate six months after the date of death, with property sold or distributed inside that window valued as of the date it left the estate instead. The election is available only when it both shrinks the gross estate and reduces the federal estate tax owed; it cannot be made asset by asset. If elected, beneficiaries inherit the AVD value as their cost basis. The election is only relevant for estates required to file Form 706 — currently those above $15 million per individual.

Under IRC § 1014(e)§ 1014(e)Verified Jul 13, 2026, the step-up does not apply when appreciated property is gifted to someone who dies within one year and the property then passes back to the original donor or the donor's spouse. In that scenario, the heir takes the decedent's pre-death adjusted basis instead of the date-of-death fair market value. Congress added the rule specifically to close the "deathbed transfer" loophole.