Texas Double Step-Up in Basis When a Spouse Dies

Texas hands married couples one of the biggest tax breaks in federal law: the double step-up in basis. When one spouse dies, both halves of the couple's community property reset to fair market value under IRC Section 1014(b)(6). Decades of appreciation on a house, land, or brokerage account can leave the survivor with no capital gains bill at all.

Texas then adds a second break that community-property neighbors like California cannot match: no state income tax. The gain that survives the step-up faces federal tax only.

This guide covers how the double step-up works in Texas, which titles qualify, and what to document. The state-law side lives in our Texas community property guide and the broader federal rules in our Texas step-up in basis guide.

What Step-Up in Basis Means

Your basis is what you paid for an asset. Sell it, and capital gains tax applies to the difference between the sale price and that basis.

Inherited assets work differently. Under IRC Section 1014, the heir's basis resets to the fair market value on the date of death. Appreciation during the decedent's lifetime escapes income tax entirely.

Without a step-up:

• Stock bought for $50,000
• Sold for $300,000
• Taxable gain: $250,000

With a step-up:

• Same stock, worth $300,000 at death
• Heir's new basis: $300,000
• Heir sells at $300,000
• Taxable gain: $0

Why Texas Couples Get the Double Version

In a separate-property state, only the deceased spouse's share of jointly owned property steps up. The survivor's half keeps its old basis.

Texas is one of the nine community property states. Property acquired during the marriage is community property under Texas Family Code Section 3.002, and IRC Section 1014(b)(6) gives community property a full reset: both halves step up when the first spouse dies.

Here is why that matters in dollars.

A Texas Example

Carlos and Diane bought a Hill Country ranch in 1992 for $180,000. Carlos dies in 2026 when it is worth $1,200,000.

If they lived in a separate-property state:

• Diane's half keeps its $90,000 basis
• Carlos's half steps up to $600,000
• Diane's total basis: $690,000
• Sale at $1,200,000 leaves a $510,000 gain
• Federal tax at 20%: $102,000

In Texas, holding it as community property:

• Both halves step up to $600,000 each
• Diane's total basis: $1,200,000
• Sale at $1,200,000 leaves no gain
• Federal tax: $0

And because the Texas Comptroller administers no personal income tax, there is no state layer on either number. A California couple in the same position saves the federal bill and still files a state return; Diane files nothing with Austin.

Titling Decides Everything

The double step-up follows the community-property character of the asset, not the marriage by itself. Three Texas titles behave differently at the first death.

Community Property, Plain

Qualifies. This covers most property acquired during the marriage: the house, brokerage accounts, business interests built while married. Texas Family Code Section 3.003 presumes that property possessed by either spouse during marriage is community property, and anyone claiming otherwise must prove it by clear and convincing evidence. The presumption does the documentation work for the survivor.

Community Property With Right of Survivorship (CPWROS)

Qualifies, and skips probate too. Under Texas Estates Code Section 112.051, spouses can sign a written agreement that community property passes straight to the survivor at death. The asset keeps its community character for the federal step-up while avoiding administration. Couples who want both results use this agreement rather than a plain joint tenancy.

Ordinary Joint Tenancy

Does not get the double. A joint tenancy with right of survivorship between spouses that lacks community character steps up only on the decedent's half. Married Texans who bought property before moving to Texas, or who titled assets as joint tenants on a brokerage form, often sit in this trap without knowing it.

Separate Property

The deceased spouse's separate property steps up in full when it passes to heirs. The survivor's own separate property never steps up at the other spouse's death. Texas Family Code Section 3.001 defines separate property: anything owned before marriage plus gifts and inheritances received during it.

What Does Not Step Up

• Retirement accounts. IRAs and 401(k)s hold pre-tax money. Beneficiaries pay ordinary income tax on withdrawals, with no basis reset.
• Annuities and installment notes. Income in respect of a decedent keeps its tax character.
• Assets given away before death. A lifetime gift carries the giver's old basis to the recipient. Families who deed the house to the kids early forfeit the step-up the kids would have received at death.

The Step-Down Warning

The reset runs in both directions. Property that lost value steps DOWN to date-of-death value, and the unrealized loss disappears. A decedent who sells a losing position before death can still use the loss; an heir cannot.

Documenting the New Basis

The survivor or executor should gather three records close to the date of death:

1. A date-of-death appraisal for real property, or broker statements for securities.
2. Title records showing how the asset was held. The community presumption helps, and a CPWROS agreement or deed recital settles it.
3. The probate inventory, if the estate goes through administration. The Texas independent administration inventory doubles as basis evidence.

Selling soon after death usually produces little or no gain, because the sale price and the stepped-up basis sit close together. Executors selling estate property can read our guide to selling inherited property in Texas.

Where the Survivor Goes From Here

The step-up is one piece of the survivor's picture. The surviving spouse also inherits the decedent's half of community property outright when there is no will and all children are shared, under Texas Estates Code Section 201.002. Our Texas surviving spouse rights guide walks through the rest, and how to avoid probate in Texas covers the survivorship tools that pair with the step-up.

Frequently Asked Questions

Does Texas get the double step-up in basis?

Yes. Texas is a community property state, so under IRC Section 1014(b)(6) both halves of community property reset to fair market value when either spouse dies, not just the deceased spouse's half.

Does Texas tax the gain when I sell inherited property?

No. Texas collects no personal income tax, so there is no state capital gains bill. Only federal capital gains tax applies, measured from the stepped-up basis.

Does joint tenancy property get the double step-up in Texas?

No. Ordinary joint tenancy steps up only the deceased owner's share. The double step-up follows community-property character, which is why titling matters.

What is a CPWROS agreement?

A Community Property With Right of Survivorship agreement under Texas Estates Code Section 112.051. Spouses agree in writing that community property passes automatically to the survivor while keeping its community-property tax character.

How do I prove property was community property?

Texas presumes it for you. Under Texas Family Code Section 3.003, property possessed by either spouse during marriage is presumed community, and whoever claims otherwise carries the burden of proof. Keep a date-of-death appraisal to document the new value.

Do retirement accounts get a step-up in Texas?

No. IRAs and 401(k)s hold pre-tax dollars and never receive a basis step-up. Withdrawals are taxed as ordinary income to the beneficiary.

Related Guides

• Texas Step-Up in Basis Guide
• Texas Community Property
• Texas Surviving Spouse Rights
• How to Avoid Probate in Texas
• Selling Inherited Property in Texas

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 555, Community Property," Internal Revenue Service, 2025, https://www.irs.gov/forms-pubs/about-publication-555
• "IRS Publication 551, Basis of Assets," Internal Revenue Service, 2025, https://www.irs.gov/publications/p551
• "Texas Family Code Chapter 3: Marital Property Rights and Liabilities," Texas Legislature, 2025, https://statutes.capitol.texas.gov/Docs/FA/htm/FA.3.htm
• "Texas Estates Code Section 112.051: Community Property with Right of Survivorship," Texas Legislature, 2025, https://statutes.capitol.texas.gov/Docs/ES/htm/ES.112.htm
• "Texas Taxes," Texas Comptroller of Public Accounts, 2025, https://comptroller.texas.gov/taxes/

This post explains the federal step-up in basis for Texas residents in plain terms. Tax outcomes turn on titling, dates, and records. Talk to a tax professional about your own numbers.