The step-up in basis at death is a critical financial concept for you to understand. It affects investing, estate planning, asset protection, and especially tax decisions you make throughout your life. If you aren’t aware of it, you may overpay your taxes by tens or even hundreds of thousands.
The basic law works like this:
Tax basis is what the IRS considers you to have paid for an asset. When you sell an asset that has appreciated, you owe capital gains taxes on the difference between the basis and the value on the date you sell it.
When someone dies and leaves an asset to an heir, the tax basis resets to the value on the day of death. That could be bad if the asset has fallen in value between the date it was purchased and the date of death (because a taxable loss was not booked) but generally, it is a good thing, reducing capital gains taxes for the heirs.
The White Coat Investor has been helping doctors with their money since 2011. Our free financial planning resource covers a variety of topics from doctor mortgage loans and refinancing medical school loans to physician disability insurance and malpractice insurance. Learn about loan refinancing or consolidation, explore new investment strategies, and discover loan programs for specifically aimed at helping doctors. If you’re a high-income professional and ready to get a “fair shake” on Wall Street, The White Coat Investor channel is for you!
Main Website: https://www.whitecoatinvestor.com
Student Loan Advice: https://studentloanadvice.com
Online Courses: https://whitecoatinvestor.teachable.com
00:00 Step Up In Basis
00:13 How It Works