Community Property Step-Up Calculator
Calculate the capital gains tax savings from the full step-up in basis available in community property states when a spouse dies. Compare full step-up vs. half step-up in common law states.
Property Details
Type of appreciated asset held as community property.
Community property states provide a full step-up in basis for both halves. Select "Common Law State" for comparison.
Tax Rates & Filing
Your federal tax filing status. Affects capital gains tax brackets.
Net Investment Income Tax of 3.8% applies if MAGI exceeds $200K (single) or $250K (married filing jointly).
Sale & Growth Assumptions
Step-Up Tax Savings Score
The community property full step-up provides substantial tax savings. You stand to benefit significantly from the basis reset on both halves of community property.
Unrealized Gain
$800,000
Full Step-Up Savings
$264,800
Total Unrealized Gain
$800,000
appreciation above cost basis
Full Step-Up Savings
$264,800
community property benefit
Half Step-Up Savings
$132,400
common law state benefit
Extra from Community Prop.
$132,400
additional savings vs common law
Tax Liability Over Time: Community Property vs Common Law
Capital gains tax owed if assets are sold at each year after step-up
Tax Savings Breakdown
Components of the full step-up tax savings
Total
$264,800
Federal Cap. Gains Saved
60%$160,000/yr
State Cap. Gains Saved
28%$74,400/yr
NIIT Saved
11%$30,400/yr
Tax Owed: Full Step-Up vs Half Step-Up vs No Step-Up
Total capital gains tax across step-up scenarios
Scenario Breakdown
Tax comparison across different sale amounts
| Scenario | FMV | Original Basis | Unrealized Gain | Tax (No Step-Up) | Tax (Half Step-Up) | Tax (Full Step-Up) |
|---|---|---|---|---|---|---|
| Full Portfolio | $1,200,000 | $400,000 | $800,000 | $264,800 | $132,400 | $0 |
| 75% of Portfolio | $900,000 | $300,000 | $600,000 | $198,600 | $99,300 | $0 |
| 50% of Portfolio | $600,000 | $200,000 | $400,000 | $132,400 | $66,200 | $0 |
| 25% of Portfolio | $300,000 | $100,000 | $200,000 | $66,200 | $33,100 | $0 |
Personalized Insights
Actionable recommendations based on your numbers
Full step-up saves $264,800 in capital gains taxes
With the community property full step-up in basis, the entire $800,000 unrealized gain is eliminated at death. This means the surviving spouse can sell all community property assets at current FMV with zero capital gains tax.
Community property saves $132,400 more than common law states
In a common law state, only the deceased spouse's half receives a step-up in basis, saving $132,400. In a community property state, both halves receive a step-up, saving an additional $132,400.
California is a community property state
As a community property state, California grants a full step-up in basis to both halves of community property at the first spouse's death under IRC Section 1014(b)(6). Ensure your assets are properly titled as community property to receive this benefit.
Selling soon after step-up maximizes the tax benefit
By selling assets shortly after the step-up, you lock in the tax-free basis reset before the assets appreciate further. Any gains accrued after the step-up date will be taxable at your capital gains rate.
Transmutation agreements can convert separate property to community property
Married couples in community property states can use a transmutation agreement to reclassify separate property as community property, potentially qualifying it for the full step-up. Consult an estate planning attorney, as this changes ownership and has implications for divorce and creditor protection.
NIIT savings of $30,400 from the step-up
The 3.8% Net Investment Income Tax applies to capital gains for high-income taxpayers. The step-up eliminates the gain, which also eliminates the NIIT on that gain. This is an often-overlooked additional benefit of the basis step-up.
Community property trusts available in some common law states
Alaska, Tennessee, South Dakota, Kentucky, and Florida allow married couples to create community property trusts, potentially providing the full step-up benefit even though they are not traditional community property states. These trusts require careful drafting and ongoing compliance.
Proper asset titling is essential to receive the full step-up
Assets must be held as community property — not as joint tenants with right of survivorship or tenants in common — to qualify for the full step-up. Review all account registrations, deeds, and brokerage titles with your estate planning attorney to ensure proper community property titling.