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Delaware Step-Up in Basis
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Delaware Step-Up in Basis

Delaware step-up in basis: inherited property resets to its date-of-death value under IRC 1014. Delaware taxes no estate and no inheritance.

By Settled Editorial

Inherited Delaware property takes a new cost basis equal to its fair market value on the day the owner died. That rule is federal, at Internal Revenue Code Section 1014(a), and it wipes out the capital gains tax on everything the asset gained during the owner's lifetime. Delaware charges no estate tax and no inheritance tax, so the only tax an heir meets here is Delaware income tax on gain, and only on a sale.

Delaware writes no basis rule of its own. What Delaware adds is the paperwork and the title question: an inventory due 3 months after letters that values every item as of the date of death, a deed rule that turns two names into a tenancy in common, a life estate that lands on the surviving spouse when there is no will, and a form the Recorder of Deeds will not record a nonresident's sale without.

What the Step-Up Does, and Where the Rule Comes From

Basis is what the tax system treats as your cost in an asset. On a sale you pay capital gains tax on the price minus that basis. The step-up changes the starting number, and on a house someone bought decades ago that is the whole question.

The problem it solves

Take a case. Your mother bought a house in Wilmington in 2001 for $132,000. At her death in 2026 it is worth $410,000. Had she deeded it to you while she was alive, you would take her $132,000 cost, called a carryover basis, and a sale at $410,000 would show a $278,000 gain.

Because you inherited it instead, your basis steps up to $410,000. Sell at $410,000 and the gain is zero. Sell two years later at $438,000 and you report $28,000 rather than $306,000. Those figures show the mechanism and are not a computation of anyone's tax.

The rule is federal, and it runs both ways

Internal Revenue Code Section 1014(a) gives property acquired from a decedent a basis equal to "the fair market value of the property at the date of the decedent's death," with three alternatives: the Section 2032 alternate valuation figure, the Section 2032A special-use figure for farm and closely held business real property, and the decedent's own basis to the extent of a Section 2031(c) conservation easement exclusion. Kent and Sussex County farm ground is the Delaware asset that second alternative was written for, and it reaches only an estate that files a federal return and makes the election.

The adjustment also runs down. An asset worth less at death than the owner paid resets to the lower figure, and the paper loss the owner could have claimed dies with them. Holding a depreciated asset until death throws away a deduction a lifetime sale would have captured.

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Delaware Charges No Estate Tax and No Inheritance Tax

Heirs mix these up constantly, so take them apart. Title 30 of the Delaware Code answers both questions in its own chapter headings.

  • Chapter 15 reads "Estate Tax [Repealed]." 81 Del. Laws, c. 52 repealed 30 Del. C. §§ 1501 through 1507, and section 2 of that act sets the reach: "This Act shall be effective for estates of decedents dying after December 31, 2017." It was approved July 2, 2017. Every one of those seven sections now carries the same line in the Code, repealed effective Jan. 1, 2018.
  • Chapter 13 reads "Inheritance [Repealed]." The whole chapter went out by 71 Del. Laws, c. 353, § 10, effective Jan. 1, 1999. There is no Delaware inheritance tax, no return, and no waiver to chase.
  • Chapter 14, the gift tax, is repealed as well. Delaware taxes neither the transfer at death nor the transfer before it.
  • One old name survives the tax and scares people. 12 Del. C. § 1912(a) still makes the Register of Wills record and index every inventory in the "Inheritance and Succession Docket." That is the name of a filing index. It charges nothing.

Only the federal estate tax can reach a Delaware estate, and it reaches a narrow band of them. The Delaware estate tax page sets out the repeal chain that gets you to that answer. Internal Revenue Code Section 2010(c)(3)(A) sets the exclusion amount at $15,000,000, indexed for inflation for a decedent dying in a calendar year after 2026, and a first spouse's unused amount can carry to the survivor if that first estate files a return and elects portability. Read whether any estate tax is due as a separate question from this one. That page decides whether a transfer tax is owed. This page decides what you pay when you sell.

Delaware Income Tax Starts With the Federal Number

Here is why the federal rule lands on a Delaware return without anyone doing anything.

30 Del. C. § 1105 says the entire taxable income of a Delaware resident is "the federal adjusted gross income as defined in the laws of the United States," with the modifications, deductions and personal exemptions of that subchapter. 30 Del. C. § 1101 goes further and makes every term in the chapter carry the same meaning it carries in federal income tax law. The stepped-up basis has already been applied by the time the federal number arrives, so it carries into Delaware with no second calculation.

Read the modification list at 30 Del. C. § 1106 and one thing stands out. The words "capital gains" appear in it exactly once, inside the definition of eligible retirement income for the age-based exclusion, where dividends, capital gains, interest and rental income are listed as qualifying receipts. Delaware offers no capital gain deduction and no preferential rate for long-term gain. Gain from selling an inherited asset lands in the same schedule as wages, and that schedule is 30 Del. C. § 1102(a)(14), which has run since taxable years beginning after December 31, 2013 and tops out at 6.6% of taxable income over $60,000. Confirm the schedule for your filing year with the Delaware Division of Revenue rather than carrying a rate forward.

The estate itself can be the taxpayer. 30 Del. C. § 1631 applies the Chapter 11 tax on individuals to the taxable income of estates and trusts, and 30 Del. C. § 1635(a) defines a resident estate's taxable income as its federal taxable income adjusted by its share of the fiduciary adjustment. So a house sold during administration reports the same stepped-up basis on a Delaware fiduciary return that a distributed house would report on the heir's own.

An out-of-state heir meets a Delaware form at settlement

This is the part that surprises people who inherit a beach house and live somewhere else.

30 Del. C. § 1124(b)(2) treats income from "the ownership or disposition of any interest in real or tangible personal property in this State" as Delaware source income for a nonresident. Selling a Delaware house or Delaware farm ground puts the gain on the Delaware side of that line even when the heir lives in Maryland or Pennsylvania. Section 1124(c) runs the other way for intangibles: gain on a brokerage account held for investment is not Delaware source income for a nonresident, so the inherited house and the inherited stock get different answers.

Then comes the collection mechanism. 30 Del. C. § 1126(b) makes every nonresident individual who sells or exchanges Delaware real estate file a declaration of estimated income tax with the Recorder, and § 1126(c) says the return and the estimated tax "shall be remitted with the deed to the Recorder before the deed shall be recorded," withheld from the net proceeds of the sale. The Division of Revenue publishes the paperwork as Form REW-EST, with Form REW-SCH when there is more than one seller. Its instructions put the rate at 6.6% for a seller that is not a C corporation.

Three lines on that form decide what you pay, and one of them is the reason this page exists.

  • Part 3 asks how the transferor acquired the property. Inheritance is an answer.
  • Line 6d asks for the adjusted basis. The printed instruction describes a purchased property, "the original purchase price of the property, non-deductible closing costs, and the cost of improvements." For inherited property the date-of-death value under Section 1014 takes the place of the purchase price, so bring the appraisal to settlement rather than trying to reconstruct what the person who died paid in 1979.
  • Part 5 carries boxes for a sale that is exempt from capital gain recognition or whose realized gain will be excluded from income for the tax year of the sale. Check one of those and the instructions say stop, complete no more parts, and no payment is due.

Section 1126(f) is worth reading beside all of that. It says the section does not impose any tax and does not affect the seller's liability for any tax. This is a prepayment held at the Recorder's counter, credited to the seller under § 1126(d), not a separate Delaware tax on inherited property.

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Delaware Writes the Date-of-Death Value Into the Inventory

The step-up is worth exactly as much as your proof of the number, and Delaware hands you a place to record it.

12 Del. C. § 1905(a) gives every executor or administrator 3 months after the granting of letters to file an inventory and appraisal with the Register of Wills of the county where the letters were granted, plus a copy with the Register of any county where the decedent owned real estate. It covers goods and chattels, a list of debts and credits, and a general description of every Delaware parcel the decedent died seized of or transferred by a transfer on death deed, with the parcel identification number. The sentence that matters to an heir sits at the end: each item "shall be separately valued at its fair market value as of the date of death of the decedent and such value shall be stated in the inventory and appraisal." Subsections (b) and (c) make the whole filing an affidavit sworn by the representative.

Three companion sections shape how good that evidence turns out to be.

  • 12 Del. C. § 1904 lets the personal representative employ 1 or more qualified and disinterested appraisers to ascertain the fair market value as of the date of the decedent's death of any asset whose value "may be subject to reasonable doubt," and lets different people appraise different asset classes. The names and addresses of any appraiser go on the inventory beside the item appraised. Delaware does not order an appraisal and does not appoint the appraiser. The estate decides, and the record it leaves is the record an auditor sees years later.
  • 12 Del. C. § 1910 requires an additional inventory when personal estate or debts turn up after the first one is returned.
  • 12 Del. C. § 1906(a) puts a $1.00 per day personal penalty on a representative who files late, running from a month after the Register gives notice of the delinquency, with contempt of the Court of Chancery behind it under subsection (b).

Two Delaware quirks belong here as well. 12 Del. C. § 1901(b) keeps three things out of the inventory entirely: "The family Bible; clothes of the decedent; and the family stores laid in before the death of the decedent." And 12 Del. C. § 1905(e) reaches property that never enters the estate at all. When real property passes by joint ownership with right of survivorship or by the entireties, the personal representative or the surviving joint tenant has to file an affidavit describing the real estate and naming the surviving owner with the Register of Wills of the county where the property sits, within 3 months after the death, whether or not anyone opens an estate. A survivor who skipped that step meets it at the settlement table.

What to gather, by asset

  • Real estate. A written appraisal as of the date of death. The county assessment figure is produced for property tax and is the weakest paper you can put in the file.
  • A Sussex or Kent beach rental. Get the valuation while the rental history is fresh, and keep the depreciation schedule if the owner reported rental income, because depreciation taken before the death is handled under Section 1014(b)(9) rather than ignored.
  • Farm ground. A written valuation from someone who values that asset class for a living, named on the inventory under § 1904.
  • Listed stocks and bonds. The IRS Instructions for Form 706 give the rule: fair market value is the mean between the highest and lowest selling prices quoted on the valuation date, and where only closing prices exist, the mean of the closing price on the valuation date and on the trading day before. Most brokers produce a date-of-death valuation statement on request.
  • A business interest. A written valuation from a qualified appraiser. Partnership and limited liability company interests also raise a Section 754 election question inside the entity.
  • Higher-value personal property. Appraisals for art, firearms, jewelry, vehicles and collections, photographed where the person who died left them.

Put the date in writing when you engage anyone. Ask for an opinion of fair market value as of the date of death, and ask that the date appear on the face of the report. Delaware executor duties covers the rest of the job, and the Delaware probate guide explains when a personal representative gets appointed at all.

Two Names on a Delaware Deed Do Not Make a Joint Tenancy

Delaware is stricter here than most people expect, and the deed decides the basis answer.

25 Del. C. § 701 says no estate in joint tenancy in lands, tenements or hereditaments shall be held or claimed under any grant, devise or conveyance made to persons other than executors or trustees, unless the premises are expressly granted, devised or conveyed to those persons "to be held as joint tenants and not as tenants in common." Silence leaves a tenancy in common. Nothing passes automatically, and the deceased owner's share travels through the estate.

Delaware still knows survivorship when a deed says so, and it knows tenancy by the entirety between spouses. 12 Del. C. § 1905(e) names both forms and treats property held either way as passing to the survivor outside the inventory, with the 3-month affidavit described above as the only paperwork. Pull the recorded deed before you assume how a Delaware property passed. Get that wrong and every later number is wrong with it. How to avoid probate in Delaware walks through the deed forms themselves.

How much actually steps up

Federal law decides that, and it splits by who the co-owners are.

  • A married couple who are the only two joint tenants, or who hold by the entirety. Internal Revenue Code Section 2040(b) calls that a qualified joint interest and includes one half of the value in the deceased spouse's gross estate whoever furnished the purchase money. One half steps up. The survivor's half keeps its original cost, and the survivor carries a mixed basis into any later sale.
  • Anyone else holding as joint tenants. Section 2040(a) applies the consideration-furnished rule. The gross estate includes the whole value except the part shown to have originally belonged to the other owner and never to have come from the decedent for less than adequate and full consideration. A child who contributed nothing to a house held jointly with a parent sees the full value included in the parent's estate, and the full value becomes the basis.

The Intestate Life Estate Is the Delaware Wrinkle

When a Delaware resident dies without a will and leaves children or a parent behind, the surviving spouse does not take a share of the house. The spouse takes a life estate in it, and that changes the basis question in a way a national page will not describe.

12 Del. C. § 502 sets the intestate share of the surviving spouse in four cases, and three of them end with the same words: "plus a life estate in the intestate real estate." Only § 502(1), where there is no surviving issue and no surviving parent, hands the spouse the entire intestate estate outright. In the other three the remainder passes under 12 Del. C. § 503(a)(1) to the issue of the decedent per stirpes, and § 503(b) makes two or more takers hold as tenants in common. So on an intestate Delaware death with a house and children, the survivor holds a life estate and the children hold a vested remainder, all of it carved out of one property at one moment. Delaware intestate succession sets out the shares themselves.

Four things follow for basis, and the fourth is where families lose money.

  • One value, then a split. The whole property was in the decedent's gross estate, so the whole property takes a date-of-death value under Section 1014(a). That single figure is then divided between the life tenant and the remaindermen under federal rules that turn on the life tenant's age and a published interest rate. Do not run that calculation from a website and do not carry an actuarial factor across from another state's page. Take the death date, the appraisal and the deed to a CPA or a tax attorney.
  • Selling the whole house together protects the basis. Internal Revenue Code Section 1001(e)(1) disregards the part of an adjusted basis that came from Section 1014 when someone sells a term interest alone, and Section 1001(e)(2)(A) says a life interest is a term interest. Section 1001(e)(3) turns that off where the sale "is a part of a transaction in which the entire interest in property is transferred to any person or persons." A life tenant who sells the life estate by itself gets the harsh rule. A family that signs one deed together does not.
  • Everyone has to sign. A buyer wants the life estate and the remainder in the same conveyance. That is a coordination problem before it is a tax problem, and it is the reason a Delaware family with an intestate house often opens an estate they thought they could skip. The Delaware probate guide covers what opening one takes.
  • There is no second step-up when the life tenant dies. The life estate simply ends. Nothing about that death brings the house into the survivor's gross estate, so the children's basis stays the figure fixed at the first death, no matter how much the house gained in between. Something else can change that, such as a general power of appointment under Internal Revenue Code Section 2041, and it has to be in the documents rather than assumed.

Delaware is a separate-property state. IRS Publication 551 names the nine community property states as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Delaware is not among them, so there is no double step-up here and no community property trust to opt into. A reader who has read about a full step-up on both halves of a married couple's property is reading about another state.

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What Does Not Step Up

  • Tax-deferred retirement accounts. Internal Revenue Code Section 1014(c) says the section "shall not apply to property which constitutes a right to receive an item of income in respect of a decedent under section 691." A traditional IRA, a 401(k), unpaid deferred compensation and similar items keep their character, and the beneficiary pays ordinary income tax on withdrawals.
  • Property the owner gave away during life. A completed lifetime gift carries the donor's basis forward. That is the trade against the step-up, and it is why deeding a house to a child early so often costs a Delaware family more than the Register of Wills would have.
  • Appreciated property given to the decedent within a year of death. Section 1014(e) blocks the round trip. Where appreciated property was acquired by the decedent by gift during the 1-year period ending on the date of death and comes back to the donor or the donor's spouse, the basis is the decedent's adjusted basis immediately before death.
  • Assets already outside the gross estate. Property in an irrevocable trust in which the decedent retained nothing takes no date-of-death basis, because nothing about the death brings it into the gross estate.

Two Delaware planning tools sit on the other side of that line, and both keep the step-up.

A revocable living trust keeps it. The assets stay in the decedent's gross estate, which is what Section 1014(b)(9) turns on, and Section 1014(b)(2) and (3) separately name a lifetime trust the decedent could revoke or alter as property acquired from the decedent. The trust moves the property around the Register of Wills without moving it out of Section 1014. A Delaware revocable living trust covers how it is built, and Delaware trust administration covers what the trustee does afterwards.

A Delaware transfer on death deed keeps it too. 25 Del. C. § 206 makes the deed revocable even if the deed itself says otherwise, § 207 makes it nontestamentary, and § 212 lists what it does not do while the owner lives, including that it does not "create a legal or equitable interest in favor of the designated beneficiary." The owner keeps everything until death, so the property sits in the gross estate and takes a date-of-death basis under Internal Revenue Code Section 1014(b)(9). Delaware's own inventory statute assumes as much: 12 Del. C. § 1905(a) makes the personal representative describe every Delaware parcel the decedent died seized of "or which transferred by a transfer on death deed under Chapter 2 of Title 25" in the same statement. The act reaches a transferor dying on or after December 4, 2025 under 25 Del. C. § 203, and the Delaware transfer on death deed guide covers the recording mechanics.

Selling, and Three Points That Follow the Death

Basis only matters when something changes hands, and selling inherited property in Delaware covers the transaction itself. Three points belong here.

The holding period is automatic. Internal Revenue Code Section 1223(9) says a person whose basis in inherited property is determined under Section 1014 and who sells within 1 year after the decedent's death "shall be considered to have held such property for more than 1 year." Long-term treatment does not depend on how fast the family moves.

The home-sale exclusion usually does not reach an heir. Section 121(a) excludes gain only where the seller owned and used the property as a principal residence for periods aggregating 2 years or more during the 5 years ending on the sale, capped at $250,000, or $500,000 on a joint return under Section 121(b)(2). An heir who never lived in the house does not qualify. Most of the time it does not matter, because the basis reset already removed the gain the exclusion would have covered.

The number on the return and the number on the sale have to agree. Where a federal estate tax return is filed, Section 1014(f) caps basis at the value finally determined for federal estate tax purposes, or the value reported on a Section 6035(a) statement. The IRS finalized regulations under that rule in T.D. 9991, and Publication 551 flags them in its own What's New. Two different figures in two different files is the audit that finds a family five years later.

The Alternate Valuation Date Almost Never Applies in Delaware

Internal Revenue Code Section 2032 lets an executor elect to value the gross estate 6 months after the death. Three restrictions keep it rare. Subsection (c) allows the election only where it decreases both the value of the gross estate and the estate tax due. Subsection (d)(1) requires the election on the estate tax return and makes it irrevocable once made. Subsection (d)(2) blocks it where the return is filed more than 1 year after the time prescribed by law including extensions.

With no Delaware estate tax and a federal exclusion at $15,000,000, almost no Delaware estate files a federal return at all. No return means no election, which means the date of death is the valuation date, which is the same date 12 Del. C. § 1905(a) already asks the Register of Wills to record.

Frequently Asked Questions

Does Delaware tax me when I inherit property?

No. Title 30 of the Delaware Code answers this in its own chapter headings. Chapter 13 reads Inheritance [Repealed], repealed by 71 Del. Laws, c. 353, § 10, effective Jan. 1, 1999. Chapter 15 reads Estate Tax [Repealed], and 81 Del. Laws, c. 52 struck 30 Del. C. §§ 1501 through 1507 with the words this Act shall be effective for estates of decedents dying after December 31, 2017. Chapter 14, the gift tax, is repealed too. What can still reach an heir is Delaware income tax on gain, and only on a sale.

Where does the date-of-death value get written down in a Delaware estate?

In the inventory and appraisal. 12 Del. C. § 1905(a) gives the executor or administrator 3 months after the granting of letters to file it with the Register of Wills of the county where the letters were granted, plus a copy in any county where the decedent owned real estate. Each item has to be separately valued at its fair market value as of the date of death of the decedent, and § 1905(b) makes the whole filing an affidavit. Delaware puts the valuation date in the statute itself, so the estate paperwork and the federal basis rule ask for the same number.

Who appraises the property in a Delaware estate?

The personal representative decides. 12 Del. C. § 1904 lets the personal representative employ 1 or more qualified and disinterested appraisers to ascertain the fair market value as of the date of the decedent's death of any asset whose value may be subject to reasonable doubt, and lets different people appraise different kinds of assets. The section then adds the part that protects an heir years later: the names and addresses of any appraiser have to appear on the inventory beside the item appraised. An heir who expects to sell should ask for a written appraisal while the estate is open.

My mother has a life estate in the house under Delaware intestacy. How does the basis work?

The house takes one date-of-death value and that value gets divided. 12 Del. C. § 502 gives an intestate surviving spouse a life estate in the intestate real estate rather than a share of it, and 12 Del. C. § 503(a)(1) sends the remainder to the decedent's issue per stirpes, held as tenants in common under § 503(b). Both interests come from the decedent, so both draw on the same date-of-death figure, and the split between them turns on federal rules and on the life tenant's age. Do not run that calculation from a website. Take the death date, the appraisal and the deed to a CPA or a tax attorney.

If my spouse and I own our Delaware home together, does the whole house step up when one of us dies?

Usually only half. Delaware is not a community property state. IRS Publication 551 names the nine that are, and Delaware is not among them. Where a married couple are the only two joint tenants, Internal Revenue Code Section 2040(b) calls that a qualified joint interest and includes one half of the value in the deceased spouse's gross estate whoever paid for it, so one half steps up and the survivor's half keeps its original cost. Read the recorded deed first, because 25 Del. C. § 701 leaves a tenancy in common unless the deed expressly says joint tenants and not tenants in common.

I live out of state and inherited a Delaware house. What does Delaware take when I sell?

Delaware collects an estimated income tax payment at settlement. 30 Del. C. § 1126(b) makes every nonresident individual who sells Delaware real estate file a declaration of estimated income tax with the Recorder, and § 1126(c) says the return and the payment travel with the deed before the Recorder will record it, withheld from the net proceeds. The Division of Revenue's Form REW-EST instructions put the rate at 6.6% for a non-corporate seller, applied to the gain on line 6e. Line 6d is the adjusted basis, which is where your stepped-up figure goes. Part 5 has boxes for a sale that is exempt from capital gain recognition or excluded from income.

Do inherited retirement accounts get a step-up in Delaware?

No, and no Delaware rule changes that. Internal Revenue Code Section 1014(c) says the basis rule does not apply to property that constitutes a right to receive an item of income in respect of a decedent under section 691. A traditional IRA, a 401(k) and similar tax-deferred money keep their character, and the beneficiary pays ordinary income tax on withdrawals with no reset. The step-up reaches capital assets such as a house, a beach rental, farmland or a taxable brokerage account.

Related Guides

This page describes Delaware and federal law broadly rather than advising on one estate. Basis outcomes turn on dates, deeds and figures that change from family to family, and the life-estate split is a calculation nobody should run from a web page. Take your own paperwork to a CPA or a tax attorney, and confirm anything procedural with the Register of Wills for the county where the person died.

Sources:

It is not legal advice.

Information current as of September 10, 2026

Settled Estate is not a law firm, and this content is for informational purposes only and does not constitute legal advice. Probate laws and procedures in Delaware can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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