Step-Up in Basis in Florida: What Heirs Pay Tax On

When a Florida resident dies, the assets their heirs receive reset to fair market value for tax purposes. That reset, the step-up in basis under IRC Section 1014, decides how much capital gains tax the family ever pays on decades of appreciation. Florida then stays out of the way: no state income tax, no state estate tax, no state layer on the sale.

There is one catch that surprises married couples who moved from Texas or California: Florida is a separate-property state, so by default only half of a couple's jointly owned property steps up at the first death.

Here is how it works, what the entireties title does and does not do, and the one Florida tool that chases the full double step-up. The evergreen rules live in our Florida step-up in basis guide.

The Reset, in One Example

Your basis is what you paid. Your heir's basis is what it was worth the day you died.

• Ana bought a Naples condo in 1998 for $150,000
• It is worth $650,000 when she dies in 2026
• Her son inherits it with a $650,000 basis
• He sells for $655,000 and reports a $5,000 gain, federal only

The $500,000 of appreciation during Ana's life never faces income tax. Florida adds nothing on top: the state collects no personal income tax, so there is no Tallahassee return to file on the sale.

Married Couples: the Single Step-Up

Most Florida couples hold their home as tenants by the entirety. At the first spouse's death, that title avoids probate, and for basis purposes it behaves like a joint tenancy: the deceased spouse's half steps up, the survivor's half keeps its old basis.

• Home bought for $200,000, worth $1,000,000 at the first death
• Deceased spouse's half: steps up to $500,000
• Survivor's half: keeps its $100,000 basis
• Survivor's total basis: $600,000
• A later sale at $1,000,000 leaves a $400,000 gain before the home-sale exclusion

Community property states run this differently: both halves step up at the first death under IRC Section 1014(b)(6). A couple who built their wealth in Texas gets the double; the same couple after twenty years in Florida holds separate property and gets the single.

The Florida Answer: the Community Property Trust

Florida gives married couples an opt-in. The Florida Community Property Trust Act lets spouses move assets into a trust that treats them as community property, aiming for the full double step-up at the first death.

It is a real planning tool with real tradeoffs: creditor exposure changes, divorce treatment changes, and the IRS has not blessed every variation. Our Florida community property explainer covers when the trust makes sense and when it backfires. This is attorney territory, so treat it as a conversation starter rather than a form to fill.

What Steps Up and What Does Not

Steps up:

• Real estate, including homestead property
• Brokerage accounts and individual stocks
• Business interests
• Collectibles and tangible property

Does not step up:

• IRAs, 401(k)s, and other pre-tax retirement accounts: beneficiaries pay ordinary income tax on withdrawals
• Annuity gains and other income in respect of a decedent
• Assets the decedent gave away during life: a lifetime gift carries the old basis with it

The last one drives a common Florida mistake: parents deeding the house to the kids to "keep it out of probate." The deed forfeits the step-up the kids would have received, trading a probate the lady bird deed could have avoided anyway for a six-figure capital gains bill.

The Step-Down

The reset runs both ways. Assets that lost value step DOWN to date-of-death value, and the unrealized loss disappears. Selling a losing position before death preserves the loss; dying with it erases it.

Documenting the New Basis

1. Date-of-death appraisal for real estate, or month-of-death broker statements for securities.
2. Title records showing how the asset was held, since the entireties question decides which half steps up.
3. The probate inventory when the estate goes through Florida probate, which doubles as basis evidence for the sale.

Heirs who sell soon after death usually owe little or nothing, because the sale price sits close to the stepped-up basis. Executors handling a house sale can start with selling inherited property in Florida.

Frequently Asked Questions

Does Florida have a step-up in basis?

Yes. The step-up is federal law under IRC Section 1014 and applies in every state. The heir's basis resets to fair market value on the date of death.

Does Florida tax capital gains on inherited property?

No. Florida has no state income tax. The only capital gains bill on a post-death sale is federal, measured from the stepped-up basis.

Do married couples get a double step-up in Florida?

Not by default. Florida is a separate-property state, so jointly held property steps up only on the deceased spouse's half.

What is the Florida community property trust?

An opt-in trust under the Florida Community Property Trust Act that treats trust assets as community property, chasing the double step-up at the first death. It carries tradeoffs and needs an attorney.

Does Florida homestead get a step-up?

Yes. Homestead steps up like any other real estate. Homestead rules control who may receive the property and its creditor protection, not its federal basis.

Related Guides

• Florida Step-Up in Basis Guide
• Florida Community Property, Explained
• Florida Lady Bird Deed
• Florida Homestead Exemption
• Selling Inherited Property in Florida

Sources:

• "Internal Revenue Code Section 1014, Basis of Property Acquired from a Decedent," Cornell Law School Legal Information Institute, 2025, https://www.law.cornell.edu/uscode/text/26/1014
• "IRS Publication 551, Basis of Assets," Internal Revenue Service, 2025, https://www.irs.gov/publications/p551
• "IRS Publication 555, Community Property," Internal Revenue Service, 2025, https://www.irs.gov/forms-pubs/about-publication-555
• "Chapter 736, Part XV, Florida Community Property Trust Act," Florida Legislature, 2025, http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0700-0799/0736/0736PARTXVContentsIndex.html
• "Florida Constitution Article VII Section 6," Florida Legislature, 2025, https://www.flsenate.gov/laws/constitution

This post explains federal basis rules for Florida residents in plain terms. Titling, trust design, and dates change the outcome. Talk to a tax professional or estate attorney about your own numbers.