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West Virginia Step-Up in Basis Explained
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West Virginia Step-Up in Basis Explained

How step-up in basis cuts the capital gains tax on inherited property in West Virginia, where only the decedent's half of jointly owned property steps up.

By Settled Editorial

When you inherit property in West Virginia, its tax basis usually steps up to the fair market value on the date the previous owner died. That resets decades of appreciation for tax purposes, so you owe capital gains tax only on the growth in value after you inherited it. For many families this is the biggest tax break in the whole estate.

West Virginia is a common-law (separate property) state, so it does not offer the community-property double step-up that states like California and Texas give married couples. Here, when two people own property jointly, only the share of the person who died steps up. This guide explains how the rule works, how to figure your new basis, and how it fits with West Virginia income tax and the state's missing death tax.

What Step-Up in Basis Means

When someone buys property, they have a "basis" in it, usually the amount they paid. When they sell, they owe capital gains tax on the gap between the sale price and that basis.

The Problem Without Step-Up

Say your father bought a house in Charleston in 1992 for $70,000. When he died in 2026, the house was worth $360,000. If he had handed you the house as a gift while he was alive, you would take his original $70,000 basis, called carryover basis. Selling for $360,000 would leave $290,000 of taxable capital gain.

How Step-Up Fixes It

Because you inherited the house instead of receiving it as a gift, your basis steps up to the fair market value on the date of death: $360,000. Sell for $360,000 and your capital gain is $0. Even if you sell a year later for $380,000, your taxable gain is only $20,000 rather than $310,000.

The Legal Foundation

The step-up comes from Internal Revenue Code Section 1014, which sets the basis of property acquired from a decedent at its value on the date of death. It reaches property that passes through:

  • Probate
  • A revocable living trust
  • Joint ownership with survivorship, for the share of the person who died
  • A transfer-on-death or payable-on-death designation

Inherited property also counts as held long-term no matter how soon you sell it, so a quick sale still earns long-term rates instead of higher short-term rates (IRS Publication 551).

How Step-Up Works for West Virginia Inherited Property

What Qualifies

Almost every capital asset inherited from a decedent receives a step-up:

  • Real estate, including homes, land, and commercial buildings
  • Stocks, bonds, mutual funds, and exchange-traded funds
  • Business interests
  • Collectibles and artwork
  • Personal property that carries value

What Does Not Qualify

Some assets do not step up:

  • Income in respect of a decedent. Traditional IRAs, 401(k)s, and other tax-deferred retirement accounts keep their built-in tax. Withdrawals are taxed as ordinary income to the person who inherits them.
  • Property gifted before death. If the owner gave you the property during life, you generally take their original basis under Internal Revenue Code Section 1015, called carryover basis.
  • Property you gave the decedent within a year of death. If you gave appreciated property to someone and it came back to you within one year because they died, no step-up applies under Internal Revenue Code Section 1014(e).

Separate Property, Not Community Property

This is the point that trips up West Virginia families who read national tax articles. West Virginia is a common-law, separate-property state, not a community-property state, so the double step-up does not apply here.

  • Only the share owned by the person who died receives a step-up.
  • When spouses own a home jointly with survivorship, only half the home steps up at the first death.
  • The surviving spouse's half keeps its original basis.

In a community-property state, the entire asset would step up at the first spouse's death. In West Virginia, the survivor still carries the built-in gain on their own half until they sell or die.

Here is what that looks like for a West Virginia couple whose home cost $150,000 and is worth $650,000 when the first spouse dies:

HalfOriginal BasisValue at DeathBasis After Death
Deceased spouse's half$75,000$325,000$325,000 (stepped up)
Surviving spouse's half$75,000$325,000$75,000 (unchanged)
Total$150,000$650,000$400,000

If the survivor later sells for $650,000, the taxable gain is $250,000 rather than the $0 a community-property state would allow. The federal home-sale exclusion under Section 121 can still shelter part of that gain when the survivor lived in the home as a main residence.

Figuring Your New Basis

Step 1: Find the Fair Market Value at Death

The date-of-death value becomes your new basis.

  • Real estate: Get an appraisal as of the date of death. The estate appraisement filed with the Fiduciary Supervisor may already carry a value.
  • Publicly traded stock: Use the average of the high and low trading prices on the date of death. If death fell on a weekend or holiday, average the trading days before and after.
  • Closely held business interests: Use a written business valuation.
  • Personal property: Use appraisals for high-value items and fair market value from comparable sales.

Step 2: Check the Alternate Valuation Date

If the estate files a federal estate tax return (Form 706), the executor may elect the alternate valuation date, which is six months after death, under Internal Revenue Code Section 2032. The election is allowed only when it lowers both the gross estate and the federal estate tax. Because it applies only to estates above the federal exclusion, almost no West Virginia estates use it.

Step 3: Add Post-Death Improvements

Capital improvements you make after inheriting add to your basis: renovations, additions, a new roof, a new heating and cooling system, or land work. Keep the receipts.

Example Calculation

ItemAmount
Fair market value at death (stepped-up cost basis)$360,000
Kitchen renovation you paid for+$28,000
New roof you installed+$12,000
Adjusted basis$400,000
Sale price$425,000
Taxable capital gain$25,000

West Virginia Capital Gains Tax

West Virginia has no separate capital gains rate. It taxes a capital gain as part of your income under the Personal Income Tax Act, at graduated rates that reach 4.58 percent for 2026, down from 4.82 percent the year before after a 5 percent rate cut (Senate Bill 392, retroactive to January 1, 2026). The 2026 rate schedule sits in W. Va. Code Section 11-21-4j. (Source: West Virginia Tax Division, 2026 Income Tax Rate Cut.)

Because the gain is taxed as ordinary income, a step-up lowers both your federal and your West Virginia tax when you sell inherited property. West Virginia starts from your federal adjusted gross income, so the smaller federal gain flows straight through to the state return.

At the federal level, long-term capital gains are taxed at 0 percent, 15 percent, or 20 percent depending on your income, and an extra 3.8 percent net investment income tax can apply at higher income. The step-up shrinks the gain those rates land on.

No West Virginia Estate or Inheritance Tax

West Virginia has no separate estate tax to plan around. W. Va. Code Section 11-11-3 imposes a West Virginia estate tax only in the amount of the federal credit for state death taxes. Congress phased out that federal credit, and it reached zero for deaths after 2004, so the West Virginia pick-up tax now computes to nothing. (Source: W. Va. Code Section 11-11-3.)

West Virginia also charges no inheritance tax. Only the federal estate tax can reach an estate, and it applies only above the federal estate tax exclusion ($15,000,000 for deaths in 2026), so it touches very few families. In West Virginia the step-up is about income tax on future capital gains, not about avoiding a state death tax, because the state does not levy one.

Step-Up vs. Step-Down

The adjustment runs both ways. If property lost value since the owner bought it, the basis steps down to the lower value at death.

  • Stock bought for $90,000
  • Worth $55,000 at death
  • Heir's basis: $55,000

If the heir sells for $55,000, there is no loss to deduct. The built-in loss vanished at death. When an asset carries a built-in loss, it can pay to sell it before death so the loss stays usable for tax purposes.

Planning Around the Single Step-Up

Hold Appreciated Assets Until Death

When you own assets that have grown a lot in value, holding them until death lets your heirs take a step-up. Selling before death triggers capital gains tax your heirs could have skipped.

Do Not Gift Highly Appreciated Property

When you gift property during life, the person who receives it takes your original basis, and the built-in gain follows the asset. For property that has grown a lot, passing it at death usually leaves a smaller tax bill than gifting it during life. When you want to give, give assets that carry little built-in gain.

A Trust or Survivorship Deed Keeps the Step-Up

Property held in a revocable living trust receives the same step-up as property that runs through probate, and so does property that passes by survivorship. You can keep an asset out of West Virginia probate without giving up the basis benefit.

Watch How Married Couples Title Property

Because West Virginia gives only a single step-up, how a couple holds title matters for the survivor. When one spouse holds most of the appreciated assets, planning ahead can put more of the gain in the estate that steps up first. A licensed West Virginia attorney can model the titling for your family.

Keep the Documents That Prove Your Basis

The IRS can question a claimed basis, so keep the proof: date-of-death appraisals for real estate, brokerage statements showing date-of-death values, the estate appraisement, business valuations, and receipts for improvements you make after inheriting. Confirm who inherits each asset by reading who inherits without a will, and review the executor and administrator duties that go with settling the estate.

Frequently Asked Questions

Does West Virginia have a double step-up in basis?

No. West Virginia is a common-law (separate property) state, so under Internal Revenue Code Section 1014 only the share owned by the person who died steps up to its date-of-death value. The surviving co-owner's half keeps its original basis. The double step-up applies only in community-property states.

Does West Virginia tax the capital gain when I sell inherited property?

Yes. West Virginia taxes a capital gain as ordinary income, with no separate capital gains rate, at graduated rates that reach 4.58 percent for 2026 (W. Va. Code Section 11-21-4j). A step-up lowers the taxable gain, so selling at the stepped-up value produces little or no West Virginia taxable gain.

Does West Virginia have an estate or inheritance tax?

No. West Virginia levies no inheritance tax, and its estate tax under W. Va. Code Section 11-11-3 equals the federal credit for state death taxes, which Congress repealed. The pick-up tax now computes to zero. Only the federal estate tax can apply, above the federal exclusion.

Do retirement accounts get a step-up in West Virginia?

No. Traditional IRAs and 401(k)s are income in respect of a decedent, so they do not receive a basis step-up. The people who inherit them owe ordinary income tax on withdrawals.

What if I received the property as a gift before death?

Lifetime gifts take a carryover basis under Internal Revenue Code Section 1015, not a stepped-up basis. Only property transferred at death receives the step-up under Internal Revenue Code Section 1014.

Related West Virginia Guides

Sources:

It is not legal advice.

Information current as of July 20, 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 West Virginia can change. Consult with a qualified attorney for advice specific to your situation. Full disclaimer.

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