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Washington Step-Up in Basis
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Washington Step-Up in Basis

Washington is a community property state, so both halves of a community asset can reset at the first death. Where the date-of-death value lives.

By Settled Editorial

When you inherit property in Washington, its cost basis resets to the fair market value on the owner's date of death. 26 U.S.C. 1014(a)(1) sets that figure, and it wipes out the capital gains tax on everything the asset gained during the owner's lifetime. You are taxed on growth after the death, and only when you sell.

Washington changes the size of that break twice over. It is one of nine community property states, so at the first spouse's death both halves of a community asset can reset rather than one. And the state's own taxes treat real estate differently from almost anything else, including under the income tax the legislature enacted in March 2026. Every Washington rule below was read at the Revised Code of Washington on August 8, 2026, and each section is linked.

What The Step-Up Does To Your Tax Bill

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 Tacoma in 1996 for $118,000. At his death in 2026 it is worth $612,000. If he had signed the deed over to you while he was alive, you would take his $118,000 cost, called a carryover basis, and a sale at $612,000 would show a $494,000 gain.

Because you inherited the house instead, your basis steps up to $612,000. Sell at $612,000 and your gain is zero. Sell two years later for $655,000 and you report $43,000 rather than $537,000.

Where the rule comes from

The rule is federal. Section 1014(a)(1) 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," and section 1014(b)(1) covers property acquired by bequest, devise or inheritance, or by the decedent's estate from the decedent. No Washington statute sets a competing basis rule, and until 2028 the state has no general income tax that would need one.

The federal reach is wide. It covers property that passes through Washington probate, a funded revocable trust, a recorded transfer on death deed under chapter 64.80 RCW, joint ownership with a right of survivorship, and a payable on death account. Skipping probate costs nobody the step-up, which is worth knowing before you read how to keep assets out of probate here.

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Both Halves Reset In A Community Property State

Here is the rule that makes Washington different from most of the country.

26 U.S.C. 1014(b)(6) treats as 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," so long as at least one-half of the whole community interest was includible in the decedent's gross estate. IRS Publication 555 lists Washington among the community property states, and it applies the same treatment to state registered domestic partners in Washington, Nevada and California.

The Washington half of the equation sits in two sections. RCW 26.16.030 defines community property by subtraction: property acquired after marriage or after registration of a state registered domestic partnership, by either person or both, that is not separate property under RCW 26.16.010 or RCW 26.16.020. RCW 11.02.070 then confirms one-half of the community property to the survivor at death and leaves the other half to pass by will or by intestacy.

Run the numbers on a rental house in Spokane that a married couple bought in 2001 for $140,000 with wages earned during the marriage. It is worth $520,000 when the husband dies.

WashingtonA separate property state
Survivor's original half$70,000$70,000
Decedent's half at death$260,000$260,000
Survivor's half after death$260,000$70,000
Basis in the whole house$520,000$330,000
Gain on an immediate $520,000 sale$0$190,000

That $190,000 difference is the single largest tax consequence of Washington's marital property system, and it turns entirely on whether an asset is community property. Our page on Washington community property works through the sorting rules, the community property agreement at RCW 26.16.120, and what the character of an asset does to the rest of an estate.

Two more Washington rules feed the same answer:

  • Property you brought from another state. RCW 26.16.220 calls it quasi-community property when the decedent acquired it while domiciled elsewhere and it would have been community property had the couple lived here. RCW 26.16.230 gives one-half to the survivor at death. Whether that state law label carries the federal community property treatment in section 1014(b)(6) is a question for a tax adviser on your specific asset, not something to assume.
  • Separate property never gets the doubling. An inheritance a spouse received during the marriage, and what it earns, stays separate under RCW 26.16.010. It resets only when its own owner dies.

What Washington Charges When You Sell

Four different Washington taxes get confused here. Take them apart.

There is no inheritance tax

The Department of Revenue is direct about it: Washington does not have an inheritance tax, and a person living in Washington who inherits property or money owes Washington nothing on the inheritance. Voters repealed the inheritance tax and enacted an estate tax at the November 1981 general election, effective January 1, 1982.

The estate tax is charged to the estate, not to you

RCW 83.100.020(1)(a) sets the applicable exclusion at $3,000,000 for a death on or after July 1, 2026, and the figure is keyed to the date of death rather than the date of sale. That is a filing question for the personal representative and it is answered on the estate tax question page, which also carries the federal threshold and the rate tables. To test one estate against the $3,000,000 exclusion and the RCW 83.100.040 rate table, run it through the Washington estate tax calculator. Basis and estate tax use the same underlying valuation work, so getting the date-of-death number right once serves both.

The capital gains excise tax skips real estate entirely

Chapter 82.87 RCW charges an excise tax on the sale or exchange of long-term capital assets. RCW 82.87.040(1) sets it at 7 percent of an individual's Washington capital gains, with an added 2.90 percent on the portion above $1,000,000 beginning January 1, 2025. Only individuals pay it. RCW 82.87.060(1) allows a standard deduction of $250,000 per individual, or $250,000 combined for spouses and state registered domestic partners, adjusted annually under RCW 82.87.150. The Department of Revenue publishes the adjusted figure; its table showed $278,000 for tax year 2025 when this page was checked on August 8, 2026, and no later year was posted there.

Then read the exemption list. RCW 82.87.050(1) exempts "all real estate transferred by deed, real estate contract, judgment, or other lawful instruments that transfer title to real property and are filed as a public record with the counties where real property is located." The Department of Revenue lists real estate first among the exempt assets. Subsection (3) also exempts assets held in tax-deferred retirement accounts, which matters because those accounts get no step-up either.

So an inherited house sold by a Washington heir sits outside this tax no matter how large the gain. An inherited brokerage account does not: publicly traded stock is a long-term capital asset with no exemption, so a gain above the standard deduction can carry the 7 percent charge. A fresh step-up is usually what keeps that gain under the line. RCW 82.87.040(4)(b) also reaches an individual as beneficial owner of assets held by a pass-through or disregarded entity or a grantor trust, so ask a CPA how the tax lands if an estate or a trust sells before distributing.

The new state income tax starts in 2028

Washington enacted an individual income tax in March 2026. The act itself took effect on June 11, 2026, and the tax reaches income starting in 2028. RCW 82A.04.030(1) reads: "Beginning January 1, 2028, a tax is imposed on the receipt of Washington taxable income. Only individuals are subject to payment of the tax, which equals 9.90 percent multiplied by an individual's Washington taxable income." The enacting law is chapter 238, Laws of 2026 (Engrossed Substitute Senate Bill 6346, titled TAXES, INDIVIDUAL INCOME OVER $1 MILLION), approved March 30, 2026 and effective June 11, 2026.

Three sections decide what it does to an heir:

  • RCW 82A.04.360 allows a standard deduction of $1,000,000 per individual, or $1,000,000 combined for spouses and state registered domestic partners, adjusted annually under RCW 82A.04.367.
  • RCW 82A.04.210(1) requires the taxpayer to deduct from federal adjusted gross income any long-term capital gains included in it. Subsection (3) then adds back the Washington capital gains subject to tax under chapter 82.87 RCW, and says the taxpayer "must not include long-term capital gains or long-term capital losses, from the sales or exchanges exempt under RCW 82.87.050." Real estate is that exemption.
  • RCW 82A.04.130 gives a nonrefundable credit against the income tax for capital gains excise tax paid on the same year's Washington capital gains, beginning in tax year 2028.

Read together, those sections keep a long-term gain on Washington real estate out of the new tax's base, and they let a gain on inherited securities into it once the combined figures clear the deductions. Two cautions before anyone plans around that. The Department of Revenue has rule-making authority under RCW 82A.04.650 and has not yet published rules. And chapter 238, Laws of 2026, section 1202 provides that if a court of final jurisdiction invalidates section 201 of the act, sections 1 through 1003 and 1201 through 1209 are null and void in their entirety. Confirm the current state of the law with a Washington CPA before pricing a sale that closes after 2027.

Proving The Date-Of-Death Value In Washington

Your basis is only as good as your evidence for it. Washington gives you one document and then makes it optional in three separate ways.

The inventory and appraisement carries the number

RCW 11.44.015(1) gives the personal representative three months after appointment, unless the court grants longer, to "make and verify by affidavit a true inventory and appraisement of all of the property of the estate passing under the will or by laws of intestacy," including a statement of every encumbrance, lien or other secured charge. The representative then determines "the fair net value, as of the date of the decedent's death, of each item contained in the inventory after deducting the encumbrances, liens, and other secured charges on the item." Items are classified into six groups: real property by legal description, stocks and bonds, mortgages and notes and other written evidence of debt, bank accounts and money, furniture and household goods, and all other personal property.

That document is the best free basis record most Washington families will get. Our guide to a personal representative's job walks through preparing it.

You may have to ask for it, in writing

Washington does not put the inventory in the public file automatically. RCW 11.44.015(2) says the inventory and appraisement "may, but need not be, filed in the probate cause." What it does say is that on written request from any heir, legatee, devisee, unpaid creditor who has filed a claim, beneficiary of a nonprobate asset from whom contribution is sought under RCW 11.18.200, or the Department of Revenue, the personal representative "shall furnish to the person, within ten days of receipt of a request, a true and correct copy."

Send that request in writing and keep the copy you get back. RCW 11.44.050 backs it up: a personal representative who neglects or refuses to make the inventory in time, or who fails to hand over a copy on request, can have the letters revoked and is liable on the bond for the injury to the estate.

Read the net value trap before you use the number

Two statutes measure two different things, and the gap between them is the most common basis error in a Washington estate.

RCW 11.44.015(1) records fair net value after deducting liens. Section 1014(a)(1) sets basis at the fair market value of the property. A Tacoma house worth $612,000 that carried a $180,000 mortgage at the date of death shows as $432,000 on the inventory. Carry that inventory figure into a later sale and you manufacture a $180,000 gain that does not exist.

The statute requires the encumbrance figures to appear beside each item, so the information you need is in the same document. Pull both numbers, and have a Washington CPA or tax preparer confirm the figure you use.

Nobody has to hire an appraiser

RCW 11.44.070 says the personal representative "may employ a qualified and disinterested person to assist in ascertaining the fair market value as of the date of the decedent's death of any asset the value of which may be subject to reasonable doubt." The verb is "may." Different people may be hired for different kinds of assets, and the court reviews the reasonableness of any fee at the final account or on a request under RCW 11.68.100 or RCW 11.68.110.

The figures are also open to challenge. RCW 11.44.035 allows the inventory and appraisement to be contradicted or avoided by evidence, and lets any party in interest challenge it at any stage of the probate. An unappraised number on an inventory is an estimate, and an estimate for a house is usually the county assessed value, which is set for property tax purposes. Order your own date-of-death appraisal when the number matters.

With no probate there is no inventory

Two common Washington routes leave no valuation document at all.

  • The successor affidavit. RCW 11.62.010 lets a claiming successor collect personal property and debts forty days after death by affidavit, with no court filing, when the estate subject to probate, less liens and encumbrances and not counting the surviving spouse's or surviving domestic partner's community property interest, does not exceed one hundred thousand dollars. It reaches personal property only. Our guide to Washington's simplified route covers who qualifies.
  • A nonprobate transfer. A recorded transfer on death deed, a payable on death account, a community property agreement or a survivorship deed moves the asset with no inventory behind it.

When one of those applies, nobody is going to write the date-of-death value down for you. Do it yourself in the first few months, while the evidence still exists.

What to gather, by asset

  • Real estate. Order a date-of-death appraisal from a Washington certified appraiser. An appraiser can date the opinion retroactively, and it gets harder to support the further you get from the death.
  • Publicly traded stock. Average the high and low trading price on the date of death. If the death fell on a weekend or a market holiday, average the nearest trading days on either side.
  • Bank and brokerage accounts. Ask for date-of-death statements. Most firms produce them on request and will not keep producing them forever.
  • A family business, farm or timberland. Commission a professional valuation while the books and the people who kept them are still around.
  • Vehicles, boats, equipment, art, jewelry and firearms. Get a written appraisal for anything worth appraising, and photograph the rest.

The alternate valuation date rarely applies

An executor who files a federal estate tax return, Form 706, may elect the alternate valuation date under 26 U.S.C. 2032, which values the gross estate six months after death. Three limits keep it out of nearly every Washington file. Section 2032(d)(1) says the election is made on the federal return, so no 706 means no election. Section 2032(c) allows it only when it decreases both the value of the gross estate and the estate tax due. And the Internal Revenue Service puts the federal filing threshold at $15,000,000 for a death during 2026. The date-of-death value is the number nearly every Washington heir uses.

Add what you spend afterwards

Capital improvements you make after inheriting raise your basis. A new roof, an addition, a foundation repair, a well or a kitchen remodel all count. Routine repairs do not, so track the two separately and keep receipts.

ItemAmount
Date-of-death value (your stepped-up basis)$612,000
New roof+$26,000
Foundation and drainage work+$31,000
Adjusted basis$669,000
Sale price$712,000
Capital gain you report$43,000

What Steps Up And What Does Not

Most capital assets reset:

  • Real estate, including homes, land, timberland and rental property
  • Stocks, bonds, mutual funds and exchange-traded funds
  • An interest in a family business or farm
  • Vehicles, boats, equipment, art, jewelry and other property worth appraising

Three categories sit outside the rule:

  • Retirement accounts. Traditional IRAs, 401(k) plans and similar tax-deferred accounts are income in respect of a decedent. Section 1014(c) says the basis rule does not apply to a right to receive an item of income in respect of a decedent under section 691. Heirs pay ordinary income tax on withdrawals and the account gets no reset.
  • Property given away during life. A lifetime gift carries the giver's basis to you. Deeding the family house to the children early is the most expensive mistake in this area, and in Washington it also gives up the community property doubling.
  • Assets that come back within a year. If you gave appreciated property to someone, they died within one year, and it returned to you, section 1014(e) denies the reset and hands you back your own adjusted basis.

Property Held Jointly Outside The Community

Community property is the doubling case. Other co-ownership follows a different rule.

Section 1014(b)(9) gives a date-of-death basis to property required to be included in the decedent's gross estate, and 26 U.S.C. 2040 decides how much of a jointly held asset goes in. For property held with a right of survivorship that is not community property, whether the co-owner is a parent, a sibling or an adult child, the survivor's own share generally keeps its original cost while the decedent's includible share resets. Ask a tax adviser to apply section 2040 to your specific asset before you assume a full reset.

A Transfer On Death Deed Keeps The Step-Up

Washington has a real transfer on death deed, and families ask whether using one trades away the reset. The statute answers it.

RCW 64.80.090 says that during a transferor's life the deed does not affect an interest or right of the transferor, including the right to transfer or encumber the property, does not affect any interest or right of the transferee, and does not create a legal or equitable interest in favor of the designated beneficiary. RCW 64.80.100(1) transfers the interest only on the death of the transferor.

The owner still owns the property when they die. 26 U.S.C. 2033 includes in the gross estate the value of all property to the extent of the decedent's interest at the time of death, and section 1014(b)(9) gives a date-of-death basis to property required to be included there. The land skips probate and the basis still resets. Have a Washington CPA or tax attorney confirm the treatment of your particular deed.

One thing the deed does not do is clear the estate's debts. RCW 64.80.120 covers liability for creditor claims and statutory allowances, and RCW 64.80.100(2) says a beneficiary takes the property subject to every encumbrance, mortgage and lien on it at the transferor's death, including liens recorded within twenty-four months afterward for state recovery claims. Our page on the Washington transfer on death deed covers execution, recording and revocation.

Your Holding Period Is Always Long Term

One federal rule saves heirs a common mistake. 26 U.S.C. 1223(9) says that where a person acquires property from a decedent, the basis is determined under section 1014, and the property is sold within one year after the death, that person is treated as having held it for more than one year.

Sell an inherited house six weeks after the funeral and the gain is still long term. That matters federally, and it also matters in Washington, because both chapter 82.87 RCW and RCW 82A.04.210 are written around long-term gains.

Records To Keep

Hold on to these so you can support your basis if the Internal Revenue Service or the Department of Revenue asks:

  • The date-of-death appraisal for real estate and for anything else of real worth
  • The RCW 11.44.015 inventory and appraisement, with the encumbrance figures beside each item
  • Brokerage and bank statements showing date-of-death balances
  • Receipts for capital improvements you make after inheriting
  • The closing statement and the selling-expense records from the eventual sale

Keep them at least three years past the return that reports the sale. Longer is safer, and storage costs almost nothing next to a disputed gain. When you reach the sale itself, our guide to what you owe when you sell covers the deed, the county auditor, the real estate excise tax and the closing paperwork.

Frequently Asked Questions

Does Washington tax me when I inherit property?

No. The Department of Revenue states that Washington does not have an inheritance tax, and that a person living in Washington who inherits property or money owes Washington nothing on the inheritance. Washington does charge an estate tax on the estate itself, with an applicable exclusion of $3,000,000 for a death on or after July 1, 2026 under RCW 83.100.020(1)(a). What can reach you later is tax on the gain when you sell, and the step-up under 26 U.S.C. 1014 usually keeps that gain small.

Why do both halves of a Washington couple's property step up?

Because Washington is a community property state. 26 U.S.C. 1014(b)(6) treats the surviving spouse's one-half share of community property as acquired from the decedent, so long as at least one-half of the whole community interest was includible in the decedent's gross estate. RCW 26.16.030 defines community property, and RCW 11.02.070 confirms one-half to the survivor at death. A couple in a separate property state resets only the decedent's half.

Where is the date-of-death value written down in a Washington estate?

In the inventory and appraisement. RCW 11.44.015(1) gives the personal representative three months after appointment to make and verify a true inventory and appraisement, and to determine the fair net value of each item as of the date of the decedent's death. Subsection (2) says it may, but need not, be filed in the probate cause. An heir, legatee, devisee, unpaid creditor who has filed a claim, or beneficiary of a nonprobate asset can request a copy in writing, and the personal representative must hand over a copy within ten days.

Is the Washington inventory figure the same as my basis?

Often not, and the gap can be large. RCW 11.44.015(1) records the fair net value after deducting encumbrances, liens and other secured charges on the item, while 26 U.S.C. 1014(a)(1) sets basis at the fair market value of the property at the date of death. A house worth $612,000 carrying a $180,000 mortgage shows as $432,000 on the inventory. Read the encumbrance figures the statute requires beside each item, and have a Washington CPA or tax preparer confirm the number you carry.

Does Washington charge capital gains tax when I sell an inherited house?

The state capital gains excise tax does not reach it. RCW 82.87.050(1) exempts all real estate transferred by deed, real estate contract, judgment or other lawful instruments that transfer title to real property and are filed as a public record with the county. The Department of Revenue lists real estate first among the exempt assets. Federal capital gains tax still applies to the gain above your stepped-up basis, and the Washington real estate excise tax under chapter 82.45 RCW applies to the sale itself.

Washington enacted an income tax. Does it hit an inherited house?

Not on the face of the statute, and it does not start until 2028. RCW 82A.04.030(1), added by chapter 238, Laws of 2026, imposes a 9.90 percent tax on Washington taxable income beginning January 1, 2028, and only individuals pay it. RCW 82A.04.360 sets a $1,000,000 standard deduction. RCW 82A.04.210(1) deducts long-term capital gains out of the base, and subsection (3) adds back only gains subject to the capital gains excise tax, expressly excluding sales exempt under RCW 82.87.050. Real estate sits in that exemption. Ask a CPA before relying on this for a sale after 2027.

Does a Washington transfer on death deed cost the heir the step-up?

No. RCW 64.80.090 says that during the transferor's life the deed does not affect the owner's right to transfer or encumber the property and creates no legal or equitable interest in the designated beneficiary. The owner still holds the property at death, so 26 U.S.C. 2033 includes in the gross estate the value of all property to the extent of the decedent's interest at death. 26 U.S.C. 1014(b)(9) gives a date-of-death basis to property required to be included in the gross estate. Have a Washington CPA or tax attorney confirm the treatment of your deed.

This page describes the statutes and federal code sections as they read on the date above, and it is general information rather than advice about one estate. Whether a particular asset is community property, how much of a jointly held asset lands in the gross estate, what the new chapter 82A.04 RCW income tax will look like once the Department of Revenue writes rules, and what value will hold up on examination are all questions that turn on facts a statute cannot settle from a distance. Those belong with a Washington CPA, a tax attorney, or a certified appraiser.

Sources:

It is not legal advice.

Information current as of August 8, 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 Washington can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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