New Bill Would Repeal Estate Tax, Keep Step-Up in Basis

The step-up in basis, which eliminates the capital gains tax on the lifetime appreciation of the decedent’s property, Slott said, “is way more important to most people than estate tax repeal, because most people are not subject to the estate tax due to the high exemption levels ($12,920,000 per person for 2023). While the vast majority of citizens don’t have an estate near that level, they do have highly appreciated property like their home, stock portfolio and other assets that have significant appreciation (but not IRAs or other tax-deferred retirement savings accounts — they never get a step-up in basis).”

To the majority, according to Slott, “the step-up in basis provides huge savings in income tax because the lifetime appreciation escapes income tax to the beneficiary upon death.”

The estate tax was temporarily repealed in 2010. “For that year, the step-up in basis was also eliminated, but you had a choice,” Slott explained. “Most estates opted for the estate tax to stay (since they didn’t have to pay it anyway) and kept the step-up in basis because that was where the big income tax savings was.”

Latta’s bill, Slott said, “is trying to get both, and that will never happen.”

— Allison Bell contributed reporting.