What Is the Step-Up in Basis for Real Estate?

Chris at Hauseit® (https://www.hauseit.com) goes over the question: What is a the step-up in basis in real estate?

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The step-up in basis in real estate is one of the best kept secrets of estate and tax planning.

It allows the owners of investment real estate to benefit from all the tax benefits of owning rental property, such as depreciation, such that they could fully depreciate a property in 27.5 years for example for residential property.

Therefore, say a condo is fully depreciated by the time the landlord passes away. That landlord can then pass on the property to his or her heirs at full-market value. Meaning if the heir sells the property, he or she won't suffer a massive capital gains tax bill due to the low or even zero cost basis of the transferred property.

Keep in mind though that this is not a loophole by itself from the estate tax, since the property is counted at market value.

Also note that even if the heir sells the property right away, it counts as a long term capital gain (if there are any from the date of transfer to the sale).

We explore this mystery and explain further in the following video.
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Hauseit Group LLC, Licensed Real Estate Broker
Tel: +1 (888) 494-8258
Email: [email protected]
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