How Does Step-Up in Basis Work in Texas?

Inherited assets in Texas take a basis reset to fair market value on the date of death, and the gain on a later sale faces no state capital gains tax.

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 Texas 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 15, 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 Texas 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 no state capital gains tax. 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 Texas layer. Short-term ordinary-income rates never apply.

Yes. Texas is a community property state, so at the first spouse's death both halves of community property take a new basis at fair market value under IRC § 1014(b)(6), not only the decedent's half. In a separate-property state the survivor's half keeps its original basis. The surviving spouse can sell soon after the death with little or no capital gains tax on the appreciation of the marriage.

Step-Up in Basis in Texas

Under the federal step-up rule, the cost basis of inherited property is reset to fair market value on the date of death. Texas residents inheriting appreciated stock, real estate, or business interests benefit from this the same way residents of every other state do — the rule is federal. State tax on any gain after the step-up is a separate, state-by-state question.

Texas does not impose a state income tax or a separate capital gains tax: after the step-up, the gain on a later sale faces no state capital gains tax. Inherited assets sold by Texas residents owe only federal capital gains tax on the post-step-up gain, at 0%, 15%, or 20% depending on total taxable income. This is one of the friendlier state environments for receiving and selling inherited appreciated property.

Because Texas is a community property state, the surviving spouse benefits from the IRC § 1014(b)(6) double step-up: both halves of community property receive a fair-market-value basis when the first spouse dies. Pairing this with a Texas revocable living trust keeps the double step-up while avoiding probate on the way to the surviving spouse and the next generation.