North Dakota Step-Up in Basis

When you inherit property in North Dakota, 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.

The basis rule is federal. No North Dakota statute writes one. What North Dakota adds is a set of rules that decide how much of an asset resets and what you keep when you sell: a default that treats co-owners as owners in common, an inventory that puts the date-of-death number on paper, and a state income tax that exempts 40% of a long-term gain and taxes the rest at no more than 2.50%.

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.

The problem it solves

Say your father bought a house in Fargo in 1994 for $96,000. At his death in 2026 it is worth $385,000. If he had deeded it to you during his life, you would take his $96,000 cost, called a carryover basis, and a sale at $385,000 would show a $289,000 gain.

Because you inherited the house instead, your basis steps up to $385,000. Sell at $385,000 and your gain is zero. Sell two years later for $410,000 and you report a $25,000 gain rather than $314,000.

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 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 in land to the extent of a qualified conservation easement exclusion under Section 2031(c). The special-use figure was written for family farms, which makes it more relevant in North Dakota than in most states, though it only comes into play on an estate large enough to file a federal estate tax return.

The adjustment runs both directions. An asset worth less at death than the owner paid steps down to that lower figure, and the loss the owner could have taken disappears.

North Dakota Charges No Estate Tax And No Inheritance Tax

Heirs mix the two taxes up all the time, so here is how they split.

• Nothing is charged for receiving an inheritance. The Office of State Tax Commissioner says North Dakota does not have an inheritance tax; it was repealed in 1927 and replaced with an estate tax.
• No estate tax is paid either. The same page says that for deaths occurring after January 1, 2005, no estate taxes are paid to North Dakota. The estate tax chapter, NDCC chapter 57-37.1, is still in the Century Code, but it collects nothing.
• North Dakota income tax reaches the gain. That is the tax an heir actually meets, and it arrives when the asset is sold, not when it is received.

Only the federal estate tax can apply, and the IRS estate tax page puts the filing threshold at $15,000,000 for a 2026 death. Estate tax and basis are separate questions that happen to share one number, the date-of-death value. For the Form 54-91 question and who pays a federal bill, read North Dakota and the federal estate tax on its own. The North Dakota estate tax page shows whether an estate comes near the federal exemption.

Only Part Of A Jointly Owned North Dakota Home Steps Up

This is where North Dakota couples and families most often guess wrong.

North Dakota presumes an interest in common

NDCC 47-02-08, "Interest in common defined," says every interest created in favor of several persons in their own right is an interest in common, unless acquired in partnership for partnership purposes or "declared in its creation to be a joint tenancy." NDCC 47-02-06 defines that joint interest as one owned by several persons in equal shares by a title created by a single will or transfer, "when expressly declared in the will or transfer to be a joint tenancy."

The statute makes no exception for a married couple. A North Dakota deed to two people with no joint tenancy wording makes them owners in common, and the deceased owner's share passes under the will or by intestacy. That share alone steps up. Pull the deed and read the vesting language before you assume anything.

When there is a joint tenancy

The survivor takes the whole property without probate. Under NDCC 47-19-06, a certified copy of the joint tenant's death certificate may be recorded with the recorder of the county where the land sits, with the legal description of the property attached, and the record is prima facie evidence of the death and the termination of the joint tenancy.

How much steps up is a federal question, and the answer depends on who the joint owners are.

• A married couple who 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 no matter who paid. One-half steps up. The survivor's half keeps its original cost.
• Anyone else holding as joint tenants. Section 2040(a) uses the consideration-furnished rule instead. The gross estate includes the whole value except the part shown to have originally belonged to the other owner. A child who paid nothing toward a Minot house held jointly with a parent sees the full value included in the parent's estate, and the full value becomes the basis.

North Dakota is not a community property state

IRS Publication 551 names the community property states as Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. North Dakota is not on that list, so the full step-up on both halves that Section 1014(b)(6) can give community property on the first death is not available on ordinary North Dakota title.

A couple who moved here from one of those nine states should not assume the old character is gone. NDCC 30.1-31-13 says a deposit of community property in an account "does not alter the community character of the property." Whether a particular asset still qualifies for the both-halves step-up turns on how it was acquired and held, which is a question for a CPA with the full acquisition history. What else a spouse takes in North Dakota is covered in North Dakota surviving spouse rights.

Where The Date-Of-Death Value Gets Written Down In North Dakota

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

The inventory carries it

NDCC 30.1-18-06, "Duty of personal representative - Inventory and appraisement," requires the personal representative, within six months after appointment or nine months after the death, whichever is later, to prepare an inventory of property the decedent owned at death, listed in reasonable detail, showing for each item "its fair market value as of the date of the decedent's death, and the type and amount of any encumbrance that may exist with reference to any item."

That sentence describes your basis document. It is dated to the death, it is itemized, and it records the debts that bear on what each asset was worth.

Get your copy

Section 30.1-18-06(2) gives the personal representative two choices. One is to file the original with the court and send copies only to interested persons who ask. The other is to skip the court filing and mail a copy to each heir in an intestate estate, or each devisee where a will was probated. Under the first choice nothing arrives unless you request it, so ask in writing while the estate is open and keep the copy with the deed.

If the personal representative later learns of property left off the inventory, or that a value on it was wrong, NDCC 30.1-18-08 requires a supplementary inventory showing the market value as of the date of death. A corrected number there changes your basis, so ask for that one too. Our guide to an executor's job in North Dakota covers preparing both, and the North Dakota probate guide explains when a personal representative is appointed at all.

Appraisers

NDCC 30.1-18-07 lets the personal representative hire "a qualified and disinterested appraiser" for 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, by asset

• Real estate and farmland. A written appraisal as of the date of death. A county assessor's value is not a date-of-death appraisal and is weak evidence.
• Listed stocks and bonds. The IRS instructions for Form 706 set the rule: fair market value is the mean between the highest and lowest selling prices quoted on the valuation date. Ask the broker for a date-of-death valuation statement.
• A business interest. A written valuation from a qualified appraiser.
• Machinery, livestock, grain and higher-value personal property. Appraisals for equipment, cattle, stored grain, firearms, vehicles and collections. Photograph them where the decedent left them.

The alternate valuation date rarely applies

Internal Revenue Code Section 2032 lets the executor value the gross estate six months after death instead, but Section 2032(c) allows that only where it lowers both the value of the gross estate and the estate and generation-skipping taxes. A federal estate tax return has to be in play, and most North Dakota estates sit far below the $15,000,000 threshold and never file one. 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 furnace, a new grain bin on a working farm. Ordinary repairs do not. Keep the invoices with the inventory copy.

What Steps Up And What Does Not

Section 1014(b) reaches property acquired by bequest, devise or inheritance, property in a trust the decedent could revoke or change, and, under Section 1014(b)(9), property included in the decedent's gross estate by reason of death or form of ownership. Between them, these North Dakota routes all produce a date-of-death basis:

• Property distributed out of North Dakota probate, whether or not there was a will. See North Dakota intestate succession for who inherits without one
• Assets titled to a funded revocable living trust
• Real estate passing by a recorded transfer on death deed, because NDCC 30.1-32.1-09 leaves every interest and right with the owner during life and creates no interest in the beneficiary
• The decedent's share of a joint tenancy, measured by the Section 2040 rules above
• Payable on death accounts and securities registered in beneficiary form
• Personal property collected by affidavit, since that route changes the paperwork and not the tax. See North Dakota's small estate affidavit

One North Dakota wrinkle on transfer on death deeds: under NDCC 30.1-32.1-10(3), if the owner who signed the deed dies while another joint owner survives, the land belongs to the surviving joint owner, and the deed takes effect only when the last joint owner dies. The basis follows whichever death actually moved the property.

Three categories do not step up:

1. Income in respect of a decedent. Traditional IRAs, 401(k) plans and other tax-deferred accounts carry no basis reset. Section 1014(c) says so directly, and the beneficiary pays ordinary income tax on withdrawals.
2. Lifetime gifts. Property handed over before death carries the donor's basis, which is why deeding appreciated land to a child during life usually costs the family more.
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 adjusted basis when the gift was made inside the one-year window ending at death.

None of the nonprobate routes cost the step-up, so avoiding probate in North Dakota is a question about time and paperwork rather than basis. The trade-offs are set out in how to avoid probate in North Dakota.

What North Dakota Charges When You Sell

40% of a long-term gain is excluded

North Dakota builds its income tax on the federal return. NDCC 57-38-30.3, "Individual, estate, and trust income tax," defines North Dakota taxable income as federal taxable income with adjustments, and subsection (2)(d) reduces it by 40% of "the excess of the taxpayer's net long-term capital gain for the taxable year over the net short-term capital loss for that year." The reduction is allowed only to the extent the gain is allocated to North Dakota.

The rates are low, and the first bracket is 0%

The same section taxes what remains at 0%, 1.95% and 2.50%. The 2023 Legislative Assembly set those rates in House Bill 1158, replacing a five-bracket system starting with tax year 2023, and subsection (1)(g) has the Tax Commissioner raise the bracket lines each year for inflation. The Commissioner's individual income tax page lists the lines for tax year 2025:

Use the table for the year of the sale, not the year of the death, and check the Commissioner's page for the current year's lines.

Here is how the pieces combine. A single North Dakota resident whose only federal taxable income for 2025 is a $100,000 long-term gain on inherited land subtracts 40%, or $40,000, leaving $60,000. The first $48,475 is taxed at 0% and the remaining $11,525 at 1.95%, for about $225 of North Dakota tax.

Inherited property is always long-term

The 40% exclusion applies only to net long-term capital gain, as the Internal Revenue Code computes it. Section 1223(9) treats property whose basis comes from Section 1014 as held for more than one year when it is sold within a year of the death. So even a sale one month after the funeral qualifies for the North Dakota exclusion and the lower federal long-term rates.

If the estate sells before distributing

NDCC 57-38-07 makes the income tax a charge against estates and trusts on their taxable income and makes the fiduciary responsible for the return. The Commissioner's fiduciary tax page says the fiduciary of a resident estate must file Form 38 if it is required to file federal Form 1041, and that the return is due April 15.

The estate's brackets are far narrower. For tax year 2024 that page lists 0% up to $3,150 of taxable income, 1.95% up to $11,325 and 2.50% above. An heir filing jointly had a 0% bracket of $80,975 in 2025. Distributing the property first and letting the heirs sell can keep more of the gain at 0%, so raise the timing question with the estate's CPA before a sale closes.

The federal side of the same gain

• The net investment income tax. Section 1411 adds 3.8% on the lesser of net investment income or the excess of modified adjusted gross income over $250,000 on a joint return or for a surviving spouse, half that for a married person filing separately, and $200,000 in any other case. An estate or trust reaches the tax at the income level where its top federal bracket begins, which is much lower, one more reason to consider distributing before selling.
• A surviving spouse selling the family home. Section 121(b)(4) lets an unmarried surviving spouse use the $500,000 exclusion rather than $250,000 where the sale happens no later than two years after the spouse's death and the ownership and use tests were met immediately before the death. Stacked on a half step-up, that often erases the gain. The two-year clock is the part people miss.

Basis is the number, and the sale is the transaction. For who signs, what the title company wants and how the deed gets recorded, see selling an inherited North Dakota house.

Records To Keep

Hold these together in one place, and keep them for as long as you own the asset plus the years a return can be examined:

• Your copy of the 30.1-18-06 inventory, and any supplementary inventory under 30.1-18-08
• Date-of-death appraisals for real estate and farmland, and the broker's date-of-death valuation statement for securities
• The deed, because its vesting language decides whether you held as joint tenants or owners in common
• The recorded death certificate under 47-19-06 if you took title as a surviving joint tenant
• Closing papers from the original purchase where property was jointly held, since Section 2040(a) turns on who paid
• Invoices for every capital improvement made after you inherited
• The settlement statement, commissions and legal and accounting fees from the eventual sale

Frequently Asked Questions

Does North Dakota tax me when I inherit property?

No. The Office of State Tax Commissioner says no estate taxes are paid to North Dakota for deaths occurring after January 1, 2005, and that North Dakota does not have an inheritance tax, which was repealed in 1927. What can reach you is income tax on the gain if you later sell the inherited asset for more than its stepped-up basis.

How does North Dakota tax the gain when I sell inherited property?

North Dakota starts from your federal taxable income and, under NDCC 57-38-30.3(2)(d), subtracts 40% of your net long-term capital gain for the year, to the extent that gain is allocated to North Dakota. The rest is taxed at 0%, 1.95% or 2.50%. For tax year 2025 the Tax Commissioner lists the 0% bracket up to $48,475 for a single filer and $80,975 on a joint return or for a qualifying widow(er). Inherited property counts as long-term no matter how soon you sell, so the 40% exclusion applies.

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

In the inventory. NDCC 30.1-18-06 requires the personal representative, within six months after appointment or nine months after death, whichever is later, to prepare an inventory showing each item's fair market value as of the date of death and any encumbrance on it. If the inventory is not filed with the court, the personal representative must mail a copy to each heir or devisee, so ask for yours and keep it.

My spouse and I own our Bismarck home together. Does the whole house step up when one of us dies?

No. North Dakota is not a community property state, and IRS Publication 551 does not list it among the nine that are. Where a married couple holds a home as the only two joint tenants, Internal Revenue Code Section 2040(b) puts one-half of the value in the deceased spouse's gross estate no matter who paid for it, so one-half steps up and the survivor's half keeps its original cost. Read the deed too: NDCC 47-02-08 makes an interest owned by several persons an interest in common unless it is declared a joint tenancy when created.

Do inherited retirement accounts get a step-up?

No. A traditional IRA, a 401(k) and similar tax-deferred accounts are income in respect of a decedent. Internal Revenue Code Section 1014(c) says the basis rule does not apply to them, and the beneficiary pays ordinary income tax on withdrawals. The step-up reaches capital assets such as real estate, a taxable brokerage account and a business interest.

Does the step-up still apply if the land passed by a North Dakota transfer on death deed?

Yes. NDCC 30.1-32.1-09 says that during the owner's life a transfer on death deed does not affect any interest or right of the owner, including the right to transfer or encumber the property, and creates no legal or equitable interest in the beneficiary. The owner keeps everything until death, so the property is included in the gross estate and takes a date-of-death basis under Internal Revenue Code Section 1014(b)(9).

Related North Dakota Guides

• Selling Inherited Property in North Dakota
• North Dakota Estate Tax and Federal Filing
• North Dakota Surviving Spouse Rights
• North Dakota Probate Guide
• North Dakota Transfer on Death Deed
• How to Avoid Probate in North Dakota
• North Dakota Small Estate Affidavit
• North Dakota Executor Duties

This guide explains how the step-up in basis works for North Dakota inherited property. Bracket lines change every year and tax outcomes turn on facts that vary by family, so take yours to a CPA or tax attorney before you sell.

Sources:

• Title: NDCC 30.1-18-06, Duty of personal representative - Inventory and appraisement. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c18.pdf#nameddest=30p1-18-06
• Title: NDCC 30.1-18-07, Employment of appraisers. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c18.pdf#nameddest=30p1-18-07
• Title: NDCC 30.1-18-08, Duty of personal representative - Supplementary inventory. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c18.pdf#nameddest=30p1-18-08
• Title: NDCC 47-02-06, Joint tenancy interest defined. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t47c02.pdf#nameddest=47-02-06
• Title: NDCC 47-02-08, Interest in common defined. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t47c02.pdf#nameddest=47-02-08
• Title: NDCC 47-19-06, Death certificates - Joint tenant - Prima facie evidence of termination of estate held. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t47c19.pdf#nameddest=47-19-06
• Title: NDCC 30.1-31-13, Community property and tenancy by the entireties. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c31.pdf#nameddest=30p1-31-13
• Title: NDCC 30.1-32.1-09, Effect of transfer on death deed during transferor's life. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c32-1.pdf#nameddest=30p1-32p1-09
• Title: NDCC 30.1-32.1-10, Effect of transfer on death deed at transferor's death. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t30-1c32-1.pdf#nameddest=30p1-32p1-10
• Title: NDCC 57-38-30.3, Individual, estate, and trust income tax. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Rates amended by 2023 House Bill 1158 (S.L. ch. 527), accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t57c38.pdf#nameddest=57-38-30p3
• Title: NDCC 57-38-07, Tax imposed on fiduciaries - Charge against estate or trust. Publisher: North Dakota Legislative Council, North Dakota Century Code. Publication Date: Accessed 2026-09-28. URL: https://ndlegis.gov/cencode/t57c38.pdf#nameddest=57-38-07
• Title: Estate Tax. Publisher: North Dakota Office of State Tax Commissioner. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.tax.nd.gov/estate-tax
• Title: Individual Income Tax. Publisher: North Dakota Office of State Tax Commissioner. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.tax.nd.gov/individual-income-tax
• Title: Individual Income Tax History. Publisher: North Dakota Office of State Tax Commissioner. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.tax.nd.gov/individual-income-tax-history
• Title: Fiduciary Tax. Publisher: North Dakota Office of State Tax Commissioner. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.tax.nd.gov/fiduciary-tax
• Title: 26 U.S.C. 1014, Basis of property acquired from a decedent. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1014&num=0&edition=prelim
• Title: 26 U.S.C. 1223, Holding period of property. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1223&num=0&edition=prelim
• Title: 26 U.S.C. 2032, Alternate valuation. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section2032&num=0&edition=prelim
• Title: 26 U.S.C. 2040, Joint interests. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section2040&num=0&edition=prelim
• Title: 26 U.S.C. 1411, Imposition of tax. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section1411&num=0&edition=prelim
• Title: 26 U.S.C. 121, Exclusion of gain from sale of principal residence. Publisher: Office of the Law Revision Counsel, United States House of Representatives. Publication Date: Not listed, accessed 2026-09-28. URL: https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section121&num=0&edition=prelim
• Title: Estate Tax. Publisher: Internal Revenue Service. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
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• Title: Instructions for Form 706. Publisher: Internal Revenue Service. Publication Date: Not listed, accessed 2026-09-28. URL: https://www.irs.gov/instructions/i706

It is not legal advice.