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Idaho Step-Up in Basis
Support GuideIdaho20 min read

Idaho Step-Up in Basis

Idaho step-up in basis: community property can reset in full at the first death under IRC 1014(b)(6), and Idaho taxes the later gain at 5.3%.

By Settled Editorial

When you inherit property in Idaho, its cost basis resets to the fair market value on the owner's date of death. That reset comes from Internal Revenue Code Section 1014, and it wipes out the capital gains tax on everything the asset gained while the owner held it. You pay tax only on growth after the death, and only when you sell.

Idaho adds the part that matters most for married couples. Idaho is a community property state, so when the first spouse dies, both halves of a community asset can reset, and the survivor can sell the family home or farm with little or no gain. Idaho then taxes whatever gain is left at 5.3%, and it lets an individual deduct 60% of the gain on qualifying Idaho real property. Every rule below was read at its official source on September 24, 2026.

What The Step-Up Does, And Where The Rule Comes From

Basis is what the tax system treats as your cost in an asset. When you sell, you pay capital gains tax on the sale price minus that basis. The step-up changes the starting number.

A Boise example

Say your mother bought a house in Boise in 1999 for $140,000. At her death in 2026 it is worth $560,000. If she had deeded it to you during her life, you would take her $140,000 cost, called a carryover basis, and a sale at $560,000 would show a $420,000 gain.

Because you inherited the house instead, your basis steps up to $560,000. Sell at $560,000 and your gain is zero. Sell two years later for $590,000 and you report a $30,000 gain.

The rule is federal

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 narrow alternatives for the alternate valuation date, special-use farm valuation and conservation easements. No Idaho statute writes its own basis rule. Idaho's law still decides how much of an asset resets, because it decides which property is community and which is separate.

The adjustment runs both ways. An asset worth less at death than the owner paid steps down to that lower value, and the loss the owner could have claimed in life disappears.

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Idaho Charges No Estate Tax And No Inheritance Tax

Heirs mix up these taxes constantly, so here is the short version.

  • Nothing is charged for receiving an inheritance. The Idaho State Tax Commission states: "Idaho has no gift tax or inheritance tax, and its estate tax for deaths expired in 2004."
  • Idaho income tax reaches the gain when you sell. That is the Idaho tax an heir actually meets, and the step-up is what keeps it small.
  • Only the federal estate tax can apply at death, and Internal Revenue Code Section 2010(c)(3) sets the exclusion amount at $15,000,000 for a 2026 death. Estate tax is a different tax from the one on this page. Idaho federal estate tax covers whether the estate owes a transfer tax, and this page covers what you pay when you sell.

Community Property Can Step Up Twice

This is the Idaho rule worth the most money, and most heirs never hear about it.

What the federal statute says

Section 1014(b)(6) treats as property acquired from the decedent "property which represents the surviving spouse's one-half share of community property held by the decedent and the surviving spouse under the community property laws of any State," if at least one-half of the whole community interest was includible in the decedent's gross estate. In plain terms, the survivor's half resets along with the decedent's half.

IRS Publication 551 lists Idaho among the nine community property states and says that when either spouse dies, "the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property." It adds that at least half the value must be includible in the decedent's gross estate "whether or not the estate must file a return." So an Idaho estate far below the federal estate tax threshold still gets the full reset.

The Boise house, owned by a married couple

Go back to the $140,000 house, now worth $560,000 when the husband dies. If it is community property, the widow's basis in the whole house becomes $560,000. She can sell it for that price and report no gain.

If the same house were the couple's joint property in a separate property state, only the husband's half would reset. The widow's basis would be $70,000 for her original half plus $280,000 for his, or $350,000, and a $560,000 sale would show a $210,000 gain.

Which property counts as community in Idaho

The full reset applies only to community property, so the label matters. Read Idaho community property for the whole picture. The short form:

  • Idaho Code 32-906(1) makes "all other property acquired after marriage by either husband or wife" community property.
  • The same subsection makes the income "of all property, separate or community" community property unless the conveyance or a written agreement between the spouses says otherwise. Rent from a spouse's separate rental house is community income by default, and so is whatever it buys.
  • Idaho Code 32-903 keeps as separate property what a spouse owned before marriage, or acquired later "by gift, bequest, devise or descent," or bought with separate proceeds. Separate property resets only for the spouse who owned it, when that spouse dies.
  • Idaho Code 32-906(2) presumes that property one spouse conveys to the other becomes the grantee's separate property. A quitclaim deed between spouses can quietly change the basis answer, so read every deed in the chain.

Whose name is on the title does not settle the question, and neither does how the couple thinks of the asset. The tracing is the work, which is why you should sort the assets before anyone sells.

Title forms that keep the community character

  • Community property with right of survivorship. Idaho Code 15-6-401 lets a deed declare real property to be held "as community property with right of survivorship," and the property passes to the surviving spouse at death without probate. Idaho Code 15-6-403, added in 2015, does the same for personal property. The statutes describe the estate as held "as community property," which is the language Section 1014(b)(6) looks for.
  • A revocable trust. Idaho Code 32-906A says community property that a couple transfers to a trust that is revocable during their joint lives, says the property stays community property, and can be amended by their joint consent, "shall be community property during the continuance of the marriage." A well-drafted joint trust keeps the reset available.
  • Joint tenancy between spouses. A deed that names a married couple as joint tenants raises a harder question. Where the property is treated as a joint tenancy and not community property, Internal Revenue Code Section 2040(b) includes only one-half of a spouses-only joint interest in the gross estate, which points to a half step-up. If your deed says "joint tenants," take the deed and the purchase history to a CPA before anyone sells.

Property you brought from another state

Idaho Code 15-2-201 calls property a spouse acquired while domiciled elsewhere, which would have been community property had the couple lived in Idaho, quasi-community property. At the death of a married person domiciled in Idaho, one-half of it belongs to the surviving spouse. That rule decides who owns the property under Idaho law. Whether the survivor's half also takes a federal reset under Section 1014(b)(6) is a separate federal question that the Idaho Code does not answer, so plan on the smaller number until a CPA confirms the larger one. The spouse's other rights in that property are covered in Idaho surviving spouse rights.

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Where The Date-Of-Death Value Gets Written Down

The step-up is worth only as much as your proof of the number.

The inventory carries it

Idaho Code 15-3-706, "Duty of personal representative, Inventory and appraisement," gives the personal representative three months after appointment to prepare an inventory of property the decedent owned at death, "indicating as to each listed item, its fair market value as of the date of the decedent's death, and the type and amount of any encumbrance."

That sentence describes your basis document. It is dated to the death, itemized, and it records the loans that bear on value.

Idaho does not make anyone file it

The last sentence of Section 15-3-706 matters. The personal representative "shall send a copy of the inventory to interested persons who request it," and "may file the original of the inventory with the court." Filing is optional. In many Idaho estates the only copy stays with the personal representative and the estate's lawyer, so ask for yours in writing while the estate is open. Idaho executor duties covers how the inventory gets prepared, and the Idaho probate guide explains when a personal representative is appointed at all.

Appraisers

Idaho Code 15-3-707 lets the personal representative hire "a qualified and disinterested appraiser" to fix the date-of-death value of any asset whose value "may be subject to reasonable doubt," allows different appraisers for different kinds of assets, and requires each appraiser's name and address on the inventory beside the items appraised. A named appraiser on a dated document beats a family estimate every time.

What to gather, asset by asset

  • Real estate. A written appraisal as of the date of death. For community property, the appraisal covers the whole property, since both halves reset.
  • Listed stocks and bonds. A date-of-death valuation statement from the broker. The IRS Form 706 instructions value listed securities at the mean between the highest and lowest selling prices on the valuation date.
  • Farm and ranch land, timber and livestock. Separate appraisals, because each can carry its own Idaho holding-period rule when you sell.
  • A business interest. A written valuation from a qualified appraiser.

The alternate valuation date rarely applies

Internal Revenue Code Section 2032 lets an executor value the estate six months after death, but Section 2032(c) allows the election only where it lowers both the gross estate and the estate tax. Most Idaho estates owe no federal estate tax, so the date-of-death figure is the basis.

Add what you spend afterward

Capital improvements you make after you inherit raise your basis: a new roof, an addition, a well, a shop. Ordinary repairs do not. Keep the invoices with your inventory copy.

What Steps Up And What Does Not

These Idaho routes all produce a date-of-death basis:

  • Property distributed out of an Idaho probate, with a will or under Idaho intestate succession
  • Assets titled to a funded revocable living trust, because Section 1014(b)(2) covers property the decedent could revoke
  • Community property with right of survivorship under Sections 15-6-401 and 15-6-403
  • The decedent's share of a joint tenancy, payable on death accounts and securities registered in beneficiary form
  • Personal property collected on an Idaho small estate affidavit, since that route changes the paperwork and leaves the tax treatment alone

Idaho has no real-property transfer on death deed. Title 15, Chapter 6 of the Idaho Code has no part for one, so an Idaho family uses survivorship title or a trust to keep a house out of probate. Neither choice costs the step-up. The trade-offs are in how to avoid probate in Idaho.

Three things do not step up:

  1. Income in respect of a decedent. Section 1014(c) excludes it. Traditional IRAs and 401(k) plans carry no reset, and withdrawals are ordinary income.
  2. Lifetime gifts. Property handed over before death keeps the donor's basis.
  3. Property you gave the decedent within a year of death. Section 1014(e) sends appreciated property back to the donor, or the donor's spouse, at the decedent's old basis.

Basis and estate tax are separate questions. Idaho has no estate or inheritance tax, and the Idaho estate tax page shows whether an estate comes near the federal exemption.

What Idaho Charges When You Sell

One flat rate

Idaho Code 63-3024, "Individuals' tax and tax on estates and trusts," last amended by 2025 chapter 13, taxes individuals, trusts and estates at 5.3% of taxable income over $2,500, or over $5,000 on a joint return. A surviving spouse's return counts as a joint return. Subsection (3) has the Tax Commission adjust those thresholds for inflation each year. Idaho has no separate capital gains rate, so a gain rides into Idaho taxable income at the same 5.3%.

Idaho's 60% capital gains deduction

Idaho Code 63-3022H, "Deduction of capital gains," gives an individual taxpayer a deduction of 60% of the capital gain net income from the sale of qualified property. Qualified property must have an Idaho situs at the time of sale and includes:

  • Real property held at least twelve months
  • Tangible personal property used in Idaho for at least twelve months by a revenue-producing enterprise, such as a processing or wholesale operation
  • Cattle or horses held for breeding, draft, dairy or sporting purposes for at least twenty-four months in Idaho
  • Timber grown in Idaho and held at least twenty-four months

The Tax Commission's capital gains page adds that stocks, bonds and interests in a partnership, LLC or S corporation are intangible property and do not qualify, and it computes the deduction on Form CG. Subsection (7) keeps property depreciated under Section 1245 from counting as real property, and subsection (2) excludes gain the Internal Revenue Code treats as ordinary income.

The holding period for inherited land

Here is where the two statutes meet. Section 63-3022H(4) measures the holding period under Internal Revenue Code Section 1223, and Section 1223(9) says a person who acquires property from a decedent with a Section 1014 basis and sells it within a year of the death "shall be considered to have held such property for more than 1 year." Read together, the text supports treating inherited Idaho real property as meeting the twelve-month test even on a quick sale. Confirm it with a CPA or the Tax Commission before you file, because the deduction runs through Form CG.

Back to the Boise house. A $30,000 gain two years after the death, reduced by the 60% deduction, leaves $12,000 of Idaho capital gain. At 5.3%, that is about $636 of Idaho tax on the gain instead of about $1,590, before the thresholds and the rest of the return.

If the estate sells before distributing

Idaho Code 63-3030 requires a return from every Idaho resident estate with gross income of $600 or more. The Tax Commission's fiduciary income tax page says that return is Form 66, that an estate is a resident estate if the decedent was domiciled in Idaho at death, and that estates generally pass income through to beneficiaries, who pay it on their own returns. Section 63-3022H(1) writes the 60% deduction for an individual taxpayer, so if the estate itself will sell Idaho land, ask the estate's preparer how the deduction reaches the Form 66 before you choose who sells.

The federal side of the same gain

  • Long-term treatment is automatic. Section 1223(9) gives inherited property a holding period of more than one year, so the lower federal long-term rates apply even to a quick sale.
  • A surviving spouse selling the home. Section 121(b)(4) lets an unmarried surviving spouse use the $500,000 exclusion instead of $250,000 if the sale happens no later than two years after the spouse's death and the ownership and use tests were met immediately before that death. Stacked on a full community property reset, that usually erases the gain.

Basis is the number, and the sale is the transaction. For who signs, what the title company asks for and when an estate can convey, see selling inherited property in Idaho.

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Records To Keep

Hold these together, and keep them for as long as you own the asset:

  • Your copy of the Section 15-3-706 inventory and any appraiser's report named on it
  • Date-of-death appraisals for real estate, land and timber, and the broker's valuation statement for securities
  • Every deed in the chain, since a spousal quitclaim or a joint tenancy deed can change the community property answer
  • Any marital agreement or trust document that declares property separate or community
  • Invoices for capital improvements made after you inherited
  • The settlement statement, commission receipts and fees from the eventual sale, plus your Form CG

Frequently Asked Questions

Does Idaho tax me when I inherit property?

No. The Idaho State Tax Commission states that Idaho has no gift tax or inheritance tax, and that its estate tax for deaths expired in 2004. Receiving the property costs you nothing in Idaho tax. What can reach you later is Idaho income tax on the gain if you sell the asset for more than its stepped-up basis, at the 5.3% rate in Idaho Code 63-3024.

Does the whole house step up when my spouse dies in Idaho?

Often, yes, if the house is community property. Internal Revenue Code Section 1014(b)(6) gives the surviving spouse's one-half share of community property a new basis at the first death, as long as at least one-half of the whole community interest is includible in the decedent's gross estate. IRS Publication 551 names Idaho as a community property state and says the total value of the community property generally becomes the basis of the entire property. Separate property works differently, so only the decedent's own separate property resets.

Which of our Idaho assets count as community property?

Under Idaho Code 32-906(1), property either spouse acquired after marriage is community property, and so is the income from all property, separate or community, unless the conveyance or a written agreement says otherwise. Under Idaho Code 32-903, property owned before marriage or acquired by gift, bequest, devise or descent stays separate. Only the community portion qualifies for the full reset at the first death.

Where does the date-of-death value get written down in an Idaho estate?

In the inventory. Idaho Code 15-3-706 gives the personal representative three months after appointment to prepare an inventory showing each item's fair market value as of the date of the decedent's death and any encumbrance. The personal representative must send a copy to interested persons who request it and may file the original with the court. Filing is optional, so ask for your copy in writing while the estate is open.

Does Idaho's capital gains deduction apply to inherited land?

It can. Idaho Code 63-3022H lets an individual deduct 60% of capital gain net income from the sale of qualified Idaho property, which includes Idaho real property held at least twelve months. Subsection (4) measures the holding period under Internal Revenue Code Section 1223, and Section 1223(9) treats inherited property sold within a year of the death as held more than one year. Stocks and bonds do not qualify. Run the numbers on Idaho Form CG and confirm the holding period with a CPA before you file.

Do inherited retirement accounts get a step-up?

No. Internal Revenue Code Section 1014(c) says the basis rule does not apply to property that is a right to receive an item of income in respect of a decedent. A traditional IRA or 401(k) carries no basis reset, and the beneficiary pays ordinary income tax on withdrawals. The step-up reaches capital assets such as a house, farmland, a taxable brokerage account and a business interest.

Related Idaho Guides

Sources:

It is not legal advice.

Information current as of September 24, 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 Idaho can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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