Georgia Step-Up in Basis: Inherited Property Tax

Georgia step-up in basis rules can save heirs thousands of dollars in capital gains tax. When you inherit property in Georgia, the tax basis of that property is "stepped up" to its fair market value on the date of the decedent's death. Decades of appreciation are effectively erased for tax purposes, and you only owe tax on any increase in value after you inherited it.

Understanding the step-up matters whether you plan to keep inherited property, sell it, or transfer it into a trust. This guide explains the rules, shows you how to figure out your new basis, and covers why Georgia, as a common-law state, gives heirs a single step-up rather than the larger break community property states allow.

What Is Step-Up in Basis?

When someone buys property or an asset, they have a "tax basis" in it, usually equal to what they paid. When they sell, they owe capital gains tax on the difference between the sale price and that basis.

The Problem Without Step-Up

Suppose your father bought a house in Savannah in 1988 for $70,000. When he died in 2025, the house was worth $310,000. If he had given you the house as a gift while he was alive, your basis would have been his original $70,000 (called "carryover basis"). Selling for $310,000 would leave you with $240,000 in taxable gain.

How Step-Up Fixes This

Because you inherited the house instead of receiving it as a gift, your basis steps up to the fair market value on the date of death: $310,000. Sell for $310,000 and your capital gain is $0. Even if you sell a year later for $325,000, your taxable gain is only $15,000 instead of $255,000.

The Legal Foundation

The step-up comes from Internal Revenue Code Section 1014(a), which sets the basis of property acquired from a decedent at its fair market value on the date of death. It applies to property that passes through:

• Probate
• A revocable living trust
• Joint tenancy with right of survivorship (for the decedent's share)
• A transfer-on-death deed
• A beneficiary designation

How Step-Up Works for Georgia Inherited Property

What Qualifies for Step-Up

Nearly every capital asset inherited from a decedent receives a step-up:

• Real estate (homes, land, commercial property)
• Stocks and bonds
• Mutual funds and ETFs
• Business interests
• Collectibles and artwork
• Personal property that has resale worth

What Does Not Qualify

Some assets do not get a step-up:

• Income in respect of a decedent (IRD): Traditional IRAs, 401(k)s, and other tax-deferred retirement accounts. Distributions are taxed as ordinary income to the beneficiary.
• Property gifted before death: If the decedent gave you property during their lifetime, you generally take their original basis (carryover basis under IRC Section 1015).
• Assets returned within one year of death: If you gave property to the decedent and it came back to you within one year of their death, no step-up applies (IRC Section 1014(e)).

Jointly Owned Property: Georgia Gets a Single Step-Up

This is where Georgia families need to be careful. Georgia is a common-law state, also called a separate property state. It is not a community property state.

For jointly owned property, only the deceased owner's half steps up. The surviving co-owner's half keeps its original basis. Say a married couple in Marietta bought a rental house for $150,000 and held it as joint tenants with right of survivorship. When it is worth $450,000 and one spouse dies, only that spouse's half resets. The surviving spouse's new basis is $75,000 (their original half) plus $225,000 (the stepped-up half), for $300,000. Selling at $450,000 leaves a $150,000 taxable gain.

Contrast that with the nine community property states. There, under IRC Section 1014(b)(6), a surviving spouse's half of community property can also step up when the first spouse dies. That "double step-up" would have reset the whole house to $450,000 and wiped out the gain. Georgia heirs do not get that break. In Georgia, only the decedent's share resets, so how property is titled between spouses can change the tax bill later.

Calculating Your New Tax Basis

Step 1: Determine Fair Market Value at Death

The date-of-death value becomes your new basis. By asset type:

Real estate: Get a professional appraisal as of the date of death. The estate may already have one from the probate inventory. Keep this documentation.

Stocks and publicly traded securities: Use the average of the high and low trading prices on the date of death. If the death falls on a weekend or holiday, average the trading prices from the business days before and after.

Closely held business interests: These need a professional business valuation. The estate may have obtained one for probate purposes.

Personal property: Use appraisals for higher-worth items and fair market value based on comparable sales for the rest.

Step 2: Consider the Alternate Valuation Date

If the estate files a federal estate tax return (Form 706), the executor may elect the alternate valuation date under IRC Section 2032, which is six months after death. The election is allowed only when it lowers both the gross estate and the estate tax, so it is rare. Most Georgia estates never file a Form 706 because the federal exemption is high, so the date-of-death value almost always controls.

Step 3: Add Post-Death Improvements

After you inherit, capital improvements you pay for increase your basis:

• Renovations and additions
• Major upgrades that add worth (new roof, new HVAC)
• Land improvements

Keep receipts so you can separate improvements from routine repairs.

Example Calculation

Step-Up for Different Asset Types

Real Estate

Real estate is where the step-up matters most. In Georgia, inherited real estate can come through several channels:

• Probate: The estate's stepped-up basis passes to the heir through the Georgia probate process.
• Trust: Property held in a revocable living trust receives the same step-up as probate property.
• TOD deed: Property passing by transfer-on-death deed receives the step-up.
• Survivorship deed: The decedent's share steps up; the surviving owner's share does not.

Stocks and Securities

Each security held at death steps up to its date-of-death value. This helps most with stock held for decades that carries a large unrealized gain. Mutual fund shares step up to the net asset value on the date of death, which erases the gain built up inside the fund. Most brokers will provide a date-of-death statement on request.

Family Businesses

Business interests receive a step-up, but the mechanics depend on the entity:

• Sole proprietorship: Each business asset steps up individually.
• Partnership or LLC: The inherited interest steps up, and a Section 754 election can adjust the inside basis of the entity's assets.
• S corporation: The stock basis steps up, but the inside basis of corporate assets does not change.

Collectibles and Personal Property

Art, antiques, jewelry, vehicles, and other higher-worth items all step up. Document the date-of-death worth with appraisals so you can support the basis later.

Georgia Capital Gains Tax

Georgia does not have a separate capital gains tax. It taxes capital gains as ordinary income under its individual income tax. Georgia has moved to a flat individual income tax rate, so a gain from selling inherited property is taxed at the same state rate as wage income. Check the Georgia Department of Revenue for the rate that applies to the year you sell, since the flat rate has been scheduled to step down over time.

Because the step-up resets your basis to the date-of-death value, most heirs who sell soon after inheriting owe little or no Georgia tax on the sale. The taxable gain is only the increase in value after the date of death, and Georgia lets you reduce it with selling costs such as real estate commissions, closing fees, and the capital improvements you added.

Federal Capital Gains Tax

At the federal level, long-term capital gains (assets held more than one year) get preferential rates:

These are 2025 thresholds; amounts adjust annually for inflation.

Net Investment Income Tax

An extra 3.8% tax applies to net investment income, including capital gains, for individuals with modified adjusted gross income above $200,000 (single) or $250,000 (married filing jointly).

Holding Period for Inherited Property

Inherited property is automatically treated as long-term under IRC Section 1223(9), no matter how long the decedent or the heir actually held it. You qualify for the lower long-term rates even if you sell the day after you inherit.

No Georgia Estate or Inheritance Tax

The Georgia Department of Revenue states that on and after July 1, 2014, no Georgia estate taxes are levied and no Georgia estate tax returns are required. Georgia also has no inheritance tax. That means:

• No state estate tax on any Georgia estate, whatever its size
• No state inheritance tax on heirs
• Only the federal estate tax applies, and only to estates above the federal exemption

The absence of a state estate tax makes the step-up even more helpful for Georgia heirs. You receive the stepped-up basis without paying any state-level transfer tax on the inheritance. For how the federal estate tax can affect a large Georgia estate, see the Georgia federal estate tax guide.

Planning Strategies to Maximize Step-Up

Hold Appreciated Assets Until Death

If you own highly appreciated assets, holding them until death lets your heirs receive a full step-up. Selling before death triggers a capital gains tax that the step-up would have avoided.

Gift Low-Basis Assets Carefully

When you gift property during your lifetime, the recipient takes your original basis (carryover basis). That erases the step-up. If you want to make lifetime gifts, gift assets with little built-in gain and keep the highly appreciated ones in your estate.

Mind How Spouses Hold Title

Because Georgia gives only a single step-up, married couples should think about titling. If one spouse holds most of the appreciated assets, only that spouse's share resets at the first death. A revocable living trust and other planning tools can help each spouse's share qualify. This is worth a conversation with a Georgia estate-planning attorney.

Use a Revocable Living Trust

Property in a revocable living trust gets the same step-up as property passing through probate, so you can avoid the probate court without giving up the tax benefit. Use the Georgia probate fee calculator to see what avoiding probate could save, and the avoid probate in Georgia guide to compare trusts with beneficiary and survivorship title.

Document the Basis

The IRS can challenge a claimed basis. Protect yourself by getting appraisals at the time of death, keeping the estate's inventory and valuation documents, and holding on to receipts for post-inheritance improvements and sale expenses.

Record-Keeping

Good records support the stepped-up basis you claim.

At the time of inheritance: date-of-death appraisals for real estate, brokerage statements showing date-of-death values, the estate inventory filed with the probate court, business valuations, and appraisals of higher-worth personal property.

During ownership: receipts for capital improvements, property tax records, and maintenance logs that separate improvements from repairs.

At the time of sale: the closing disclosure or settlement statement, real estate commission receipts, legal and accounting fees, transfer tax receipts, and any other selling expenses.

Keep these papers for at least three years after you file the return that reports the sale, though holding them longer is wise.

Frequently Asked Questions

Does Georgia have a double step-up in basis like community property states?

No. Georgia is a common-law (separate property) state, so only the deceased owner's share of jointly owned property steps up to date-of-death value. The surviving co-owner keeps their original basis. The double step-up under IRC Section 1014(b)(6) applies only in the nine community property states.

Does Georgia tax the capital gain when I sell inherited property?

Yes. Georgia has no separate capital gains tax, but it taxes capital gains as ordinary income under its flat individual income tax. A step-up lowers the taxable gain, so selling near the date-of-death value produces little or no Georgia taxable gain. Check the Georgia Department of Revenue for the current rate.

Does Georgia have an estate or inheritance tax?

No. The Georgia Department of Revenue states that no Georgia estate taxes are levied for deaths on or after July 1, 2014, and Georgia has no inheritance tax. Only the federal estate tax can apply, and only to estates above the federal exemption.

Do retirement accounts get a step-up in Georgia?

No. Traditional IRAs and 401(k)s are income in respect of a decedent, so they do not receive a basis step-up. Beneficiaries owe ordinary income tax on withdrawals.

What if the property lost value before the owner died?

The basis steps down to the lower date-of-death value under IRC Section 1014. Inheriting depreciated property can cost you a loss the decedent could have claimed, so it is often better to sell a loss asset before death.

Can I sell inherited Georgia property right away and still get the step-up?

Yes. Your basis is the date-of-death value, and under IRC Section 1223(9) inherited property counts as long-term no matter how soon you sell, so the lower long-term rates apply even to a quick sale.

Related Georgia Guides

• Selling Inherited Property in Georgia
• Georgia Estate Tax and Inheritance Tax
• Georgia Probate Fee Calculator
• Georgia Revocable Living Trust
• Georgia Transfer-on-Death Deed

---

Sources

Last Updated: July 2026. This guide provides general information about the step-up in basis for Georgia inherited property. Tax situations vary by individual. Consult a tax professional or CPA for advice specific to your situation. It is not legal advice.