Nevada Step-Up in Basis: Double Step-Up

Nevada's community property system hands married couples one of the biggest tax breaks in estate planning: the double step-up in basis. When one spouse dies, this rule can erase the capital gains that built up over a lifetime of ownership. Because Nevada charges no state income tax, the only tax left in the picture is federal.

Knowing how the step-up works helps you decide how to title your property.

What Is Step-Up in Basis?

When you sell property, you pay capital gains tax on the difference between the sale price and your "basis," which is usually what you paid for the asset.

Example without step-up:

You buy stock for $10,000
You sell it for $100,000
Capital gain: $90,000
Federal tax: about $18,000 at the 20% long-term rate

When you inherit property, your basis "steps up" to the fair market value at the date of the decedent's death. This wipes out the tax on all the appreciation that happened during the decedent's lifetime.

Example with step-up:

Decedent bought stock for $10,000
Stock is worth $100,000 at death
You inherit it with a stepped-up basis of $100,000
You sell it for $100,000
Capital gain: $0
Tax owed: $0

The step-up comes from Internal Revenue Code Section 1014(a). Because the asset passes at death, IRC Section 1223(9) automatically treats the heir's holding period as long-term, so any later gain qualifies for the lower long-term capital gains rates rather than short-term rates.

The Nevada Double Step-Up

In most states, when jointly owned property passes at death, only the decedent's half receives a step-up. The surviving owner's half keeps its original basis.

Nevada works differently. Under IRC Section 1014(b)(6), 100% of community property receives a stepped-up basis when either spouse dies. This is the "double step-up."

Why Nevada Is Different

Nevada is a community property state. Under NRS 123.220, property that a married couple acquires during the marriage is community property, and each spouse owns an undivided one-half interest. When one spouse dies, federal law treats the entire community asset as includible for step-up purposes, not just the decedent's half. That is what triggers the double step-up.

The Tax Savings

Scenario	Original Basis	Value at Death	Stepped-Up Basis	Gain if Sold
Common-law state (joint tenancy)	$180,000	$780,000	$480,000	$300,000
Nevada (community property)	$180,000	$780,000	$780,000	$0

In this example, the Nevada family avoids capital gains tax on $300,000 of appreciation. At the 20% top federal long-term rate under IRC Section 1(h), that is roughly $60,000 in tax the surviving spouse never pays.

Detailed Example

John and Maria, Nevada residents, bought a Reno rental duplex in 1998 for $180,000. By 2025 it is worth $780,000. John dies.

In a Common-Law (Separate Property) State

If the duplex were held as joint tenants in a separate property state:

Maria's half: original basis of $90,000
John's half: steps up to $390,000
Total basis: $480,000

If Maria sells for $780,000:

Capital gain: $300,000
Federal tax at 20%: $60,000

In Nevada

Because the duplex is community property:

Maria's half: steps up to $390,000
John's half: steps up to $390,000
Total basis: $780,000

If Maria sells for $780,000:

Capital gain: $0
Federal tax: $0

Tax savings: about $60,000. All of it is federal, because Nevada never had a state capital gains tax to add.

No Nevada Tax on Capital Gains

Nevada has no state personal income tax, so it does not tax capital gains at all. The Nevada Constitution, Article 10, bars a tax on personal income. This is a real advantage over community property states such as California, where a large gain can still trigger a hefty state income tax bill even after the double step-up applies.

For a Nevada resident, only federal capital gains tax applies. Federal long-term rates are 0%, 15%, or 20% depending on taxable income, under IRC Section 1(h). A step-up that reduces the federal gain is the whole tax picture, with no separate state bill behind it.

No Nevada Estate or Inheritance Tax

Nevada also imposes no state estate tax and no inheritance tax. Its former pick-up estate tax under NRS Chapter 375A depended on a federal credit that Congress repealed, so it no longer applies to deaths in Nevada. Beneficiaries owe no Nevada tax simply for inheriting.

The federal estate tax can still reach very large estates. For 2026, the federal basic exclusion is $15 million per person, portable to a surviving spouse only with a timely election. The step-up in basis is a separate income tax rule that applies whether or not any estate tax is due.

Which Property Qualifies

Community Property

Property that a married couple acquires during the marriage with community funds (wages, salary, or business income) generally qualifies for the double step-up:

Primary residence
Rental and investment properties bought during the marriage
Brokerage and investment accounts funded during the marriage
Business interests built during the marriage

What Does NOT Qualify

Separate property. Property owned before marriage, or received by gift or inheritance during the marriage, is separate property. Only the decedent's share receives a step-up.

Joint tenancy. Property held in joint tenancy rather than community property receives only a single step-up on the decedent's share. This is why the way a Nevada couple titles an asset matters for the tax result.

Retirement accounts. Traditional IRAs and 401(k)s are income in respect of a decedent under IRC Section 691. They do not receive a basis step-up, and beneficiaries pay ordinary income tax on withdrawals.

Lifetime gifts. An asset given away before death keeps its carryover basis under IRC Section 1015. Only property that passes at death gets the step-up, so gifting a highly appreciated asset during life can cost the recipient the step-up they would have received later.

The Six-Month Alternate Valuation Date

Basis usually equals the fair market value on the date of death. Under IRC Section 2032, the executor of a taxable estate may instead elect to value assets six months after death. That election is available only when it decreases both the gross estate and the estate tax, so it rarely applies below the federal exemption. For most Nevada families, the date-of-death value sets the new basis.

Documentation Requirements

To support the double step-up, keep documentation that shows two things.

1. Community Property Character

Evidence that the asset was community property:

Marriage certificate
Date of acquisition during the marriage
Source of funds showing community income
Deed or title reflecting community property ownership

2. Fair Market Value at Death

Proof of the value on the date of death:

Real estate appraisal
Brokerage statements
Probate inventory
Professional valuations

Keep the death certificate, the valuations at death, and the original purchase documents together, so the appreciation is easy to reconstruct.

Converting Joint Tenancy to Community Property

Many Nevada couples hold real estate as joint tenants because that language was already on the deed form. Retitling the property as community property, or as community property with right of survivorship, preserves the double step-up.

How to Convert

Sign and record a new deed that changes the ownership from "joint tenants" to "community property" or "community property with right of survivorship."

Considerations

Transfers between spouses generally carry no gift tax consequences
Retitling for step-up purposes should be documented carefully
Convert before the first spouse's death, because the opportunity closes once a spouse has died

Work with an estate planning attorney or tax professional to confirm the deed language for your situation.

Step-Up vs. Step-Down

The adjustment works in both directions. If an asset has lost value since it was purchased, the basis steps down to the lower value at death.

Example:

Stock purchased for $100,000
Worth $50,000 at death
Heir's basis: $50,000

If the heir later sells for $50,000, there is no loss to deduct. The built-in loss disappeared at death.

Planning tip: if an asset has a built-in loss, selling before death can capture that loss for tax purposes instead of letting it vanish.

Impact on Estate Planning

Revocable Living Trusts

Property transferred to a revocable living trust keeps its community property character. The double step-up still applies when the first spouse dies, so funding a revocable trust does not cost a Nevada couple this benefit.

Basis Planning

Some families manage basis deliberately:

Hold appreciated assets until death so heirs receive the step-up
Sell depreciated assets before death to capture the loss
Keep records that establish community property character

Frequently Asked Questions

Does Nevada have a double step-up in basis?

Yes. Nevada is a community property state under NRS 123.220, so under IRC Section 1014(b)(6) both halves of community property step up to fair market value when the first spouse dies. This can erase the capital gains built up during the marriage.

Does Nevada tax capital gains on inherited property?

No. Nevada has no state personal income tax, so it does not tax capital gains. The Nevada Constitution (Article 10) bars a personal income tax. Only federal capital gains tax can apply when you sell an inherited asset.

Does joint tenancy get a double step-up in Nevada?

No. Joint tenancy property receives only a single step-up on the decedent's share. To get the double step-up, married couples must hold the asset as community property.

Does Nevada have an estate tax or inheritance tax?

No. Nevada levies no state estate tax and no inheritance tax. Its former pick-up estate tax under NRS Chapter 375A depended on a federal credit that Congress repealed, so it no longer applies. Only the federal estate tax can reach very large estates.

Do retirement accounts get a step-up in basis in Nevada?

No. Traditional IRAs and 401(k)s are income in respect of a decedent and do not receive a basis step-up. Beneficiaries pay ordinary income tax on withdrawals, and this rule is federal, so Nevada residents are treated the same as everyone else.

What if the property was purchased before marriage?

Property owned before marriage is separate property, not community property. Only the decedent's share receives a step-up. The surviving spouse's share keeps its original basis unless the couple changed the property's character during the marriage.

Sources

Internal Revenue Code Section 1014(a) (Basis of Property Acquired from a Decedent)
Internal Revenue Code Section 1014(b)(6) (Community Property)
Internal Revenue Code Section 1223(9) (Holding Period of Inherited Property)
Internal Revenue Code Section 2032 (Alternate Valuation Date)
Internal Revenue Code Section 691 (Income in Respect of a Decedent)
Internal Revenue Code Section 1015 (Basis of Property Acquired by Gift)
Internal Revenue Code Section 1(h) (Maximum Capital Gains Rates)
Nevada Revised Statutes 123.220 (Community Property)
Nevada Constitution, Article 10 (No Personal Income Tax)
NRS Chapter 375A (Tax on Estates, dormant)
IRS Publication 551 (Basis of Assets)

Last Updated: July 2026. Tax rules are complex and change frequently. This guide provides general information. Consult a tax professional or estate planning attorney for advice specific to your situation. It is not legal advice.