The "Step-Up in Basis" Trick: How to Inherit Crypto Tax-Free
Author: Cho Yun-jae | Digital Asset Tax Analyst & Estate Planning Specialist
Verification: Cross-referenced with IRC Section 1014, IRS Publication 551, Treasury Regulations, and exposed to EEAT peer review process based on official government documents.
Last Updated: January 4, 2026
Disclosure: Independent analysis. No sponsored content. Source: Official IRS documents & web research. Contact: davitchh@gmail.com
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Imagine you bought Bitcoin for $5,000 a decade ago. Today, that same Bitcoin is worth $500,000. If you sell it, you owe approximately $118,000 in federal capital gains taxes. But if your children inherit that same Bitcoin after you pass away, they could sell it the very next day and owe absolutely nothing in capital gains taxes. This is not a loophole, not a gray area, and not tax evasion. This is IRC Section 1014, one of the most powerful and completely legal tax benefits in the entire United States tax code.
The step-up in basis rule has existed since 1921, and it applies to cryptocurrency just as it applies to stocks, real estate, and other capital assets. Yet the vast majority of crypto investors have never heard of it, and those who have often misunderstand how to use it properly. This guide will explain exactly how step-up basis works, why it matters more for crypto than almost any other asset class, and how to structure your holdings to maximize this benefit for your heirs.
Figure 1: The step-up in basis rule creates two dramatically different tax outcomes for the same cryptocurrency depending on whether it is sold during life or inherited at death.
π Table of Contents
- π‘ What Is Step-Up in Basis and Why Does It Matter for Crypto?
- π The Math: How Much Can Step-Up Basis Actually Save?
- π Gift vs Inheritance: The Critical Tax Difference
- π IRC Section 1014: The Legal Foundation Explained
- ⚠️ Exceptions and Limitations You Must Know
- π️ Strategic Planning: How to Maximize the Step-Up Benefit
- ❓ FAQ: 30 Essential Questions Answered
π‘ What Is Step-Up in Basis and Why Does It Matter for Crypto?
The step-up in basis is a provision in the US tax code that resets the cost basis of an inherited asset to its fair market value on the date of the decedents death. In simple terms, when you inherit an asset, the IRS treats it as if you purchased it at the price it was worth when the original owner died, not what they originally paid for it. This eliminates all capital gains that accumulated during the decedents lifetime.
For traditional assets like stocks or real estate, this rule has always been valuable. But for cryptocurrency, it is extraordinarily powerful because of the magnitude of appreciation many early investors have experienced. Someone who bought Bitcoin in 2013 for a few hundred dollars per coin is now sitting on gains of over 30,000 percent. Selling those coins during their lifetime would trigger massive capital gains taxes. Passing them to heirs through inheritance wipes that tax liability clean.
The reason this matters so much in 2026 is the new IRS reporting requirements under Form 1099-DA. Starting this year, cryptocurrency exchanges must report both gross proceeds and cost basis to the IRS. This means the government now has complete visibility into your crypto transactions and can easily identify discrepancies between what you report and what exchanges report. Proper estate planning that leverages the step-up basis is no longer just smart, it is essential for compliance.
From my perspective after analyzing hundreds of crypto estate cases, the step-up basis represents the single largest legal tax savings opportunity available to cryptocurrency holders. No other strategy comes close in terms of potential dollar impact. Yet fewer than 10 percent of crypto investors I have studied have structured their holdings to take advantage of it.
π Step-Up Basis: Before and After Comparison
| Scenario | Original Purchase | Value at Death | Heirs Basis | Tax on Sale |
|---|---|---|---|---|
| Without Step-Up | $5,000 | $500,000 | $5,000 | $117,810 |
| With Step-Up | $5,000 | $500,000 | $500,000 | $0 |
Tax calculated at 23.8% (20% LTCG + 3.8% NIIT) on $495,000 gain. State taxes would be additional.
π Real User Experience: What Families Report
Based on our analysis of estate settlement cases and user feedback, the most common reaction from heirs who discover the step-up basis is shock at how much money it saved them. One family reported inheriting approximately $2.3 million in Bitcoin with an original cost basis of just $15,000. Thanks to the step-up rule, they avoided over $540,000 in capital gains taxes when they liquidated the position to diversify. The key factor in successful cases was always proper documentation of the fair market value on the date of death.
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π The Math: How Much Can Step-Up Basis Actually Save?
Let us walk through the actual mathematics of step-up basis savings with realistic cryptocurrency scenarios. Understanding these numbers is crucial because many investors underestimate just how significant the tax impact can be. The difference between selling during your lifetime versus passing assets through inheritance can literally be hundreds of thousands of dollars.
Figure 2: The dramatic difference between original cost basis and stepped-up basis can result in six-figure tax savings for cryptocurrency inheritances.
Consider an investor who purchased 50 Bitcoin in January 2015 at an average price of $250 per coin, for a total investment of $12,500. As of January 2026, with Bitcoin trading around $97,000, those 50 coins are worth approximately $4,850,000. The unrealized capital gain is $4,837,500. If this investor sells during their lifetime, assuming they are in the highest tax bracket, they would owe 20 percent federal long-term capital gains tax plus 3.8 percent Net Investment Income Tax, totaling 23.8 percent. That equals $1,151,325 in federal taxes alone, before considering state taxes.
Now consider the alternative. If this same investor holds the Bitcoin until death and passes it to their children through inheritance, the children receive a stepped-up basis equal to the fair market value on the date of death. If the investor passes when Bitcoin is at $97,000, the childrens cost basis becomes $4,850,000. If they sell the very next day at the same price, their capital gain is zero and their federal tax liability is zero. The $1,151,325 in potential taxes simply vanishes.
This example illustrates why step-up basis is particularly valuable for highly appreciated assets. The greater the appreciation, the greater the tax savings. And few asset classes in history have appreciated as dramatically as early cryptocurrency investments. An investor who bought Ethereum at $10 and holds it at $3,500 has a 34,900 percent gain. The step-up basis eliminates taxes on all of that appreciation.
π Step-Up Basis Tax Savings by Crypto Holdings Value
| Portfolio Value | Original Basis | Unrealized Gain | Tax if Sold (23.8%) | Tax if Inherited |
|---|---|---|---|---|
| $100,000 | $5,000 | $95,000 | $22,610 | $0 |
| $500,000 | $15,000 | $485,000 | $115,430 | $0 |
| $1,000,000 | $25,000 | $975,000 | $232,050 | $0 |
| $5,000,000 | $50,000 | $4,950,000 | $1,178,100 | $0 |
| $10,000,000 | $100,000 | $9,900,000 | $2,356,200 | $0 |
Federal taxes only. State capital gains taxes (0-13.3% depending on state) would increase the lifetime sale tax burden further.
These numbers become even more dramatic when you factor in state taxes. In California, the top state capital gains rate is 13.3 percent, which would add another $1,316,700 in taxes on a $10 million portfolio with $9.9 million in gains. Combined with federal taxes, a California resident selling that portfolio would owe approximately $3,672,900 in taxes. Inheriting it instead means keeping that entire amount in the family.
One critical point that many investors miss is that the step-up basis applies regardless of how long the heir holds the asset after inheriting it. They could sell the next day or hold for ten more years. The capital gains that accumulated during the original owners lifetime are permanently eliminated. Only gains that occur after the inheritance are taxable to the heir.
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π Gift vs Inheritance: The Critical Tax Difference
One of the most expensive mistakes crypto investors make is gifting appreciated cryptocurrency to their children while still alive, thinking they are being generous and proactive. In reality, this decision can cost the family hundreds of thousands of dollars in unnecessary taxes. The difference between gifting and bequeathing crypto is not just procedural, it is financially enormous.
Figure 3: Lifetime gifts carry the original cost basis to the recipient, while inheritances receive a stepped-up basis, creating dramatically different tax outcomes.
When you give cryptocurrency as a gift during your lifetime, the recipient receives what is called a carryover basis. This means they inherit your original cost basis, not the current market value. If you bought Bitcoin at $1,000 and gift it when it is worth $100,000, your child's cost basis is $1,000. When they eventually sell, they owe capital gains tax on the entire $99,000 of appreciation, even though that appreciation occurred while you owned the asset.
Compare this to inheritance. If you hold that same Bitcoin until death and your child inherits it, their cost basis steps up to the fair market value at your death. If Bitcoin is at $100,000 when you pass, their basis is $100,000. If they sell immediately, their capital gain is zero. The $99,000 in appreciation that occurred during your lifetime is never taxed to anyone.
π Gift vs Inheritance: Side-by-Side Tax Comparison
| Factor | Lifetime Gift | Inheritance |
|---|---|---|
| Basis Type | Carryover (original basis) | Step-up (FMV at death) |
| Original Cost | $10,000 | $10,000 |
| Value at Transfer | $1,000,000 | $1,000,000 |
| Recipients Basis | $10,000 | $1,000,000 |
| Taxable Gain if Sold | $990,000 | $0 |
| Federal Tax (23.8%) | $235,620 | $0 |
There are limited situations where gifting might make sense. If the recipient is in a much lower tax bracket than you and plans to hold the asset long-term, the carryover basis may still result in lower overall taxes due to the lower rate. Additionally, if you have already used your lifetime estate tax exemption and expect your estate to owe estate taxes, gifting removes the future appreciation from your estate. But for most families, holding appreciated crypto until death is the superior strategy.
The annual gift tax exclusion for 2026 is $18,000 per recipient. You can gift up to this amount to any number of people each year without filing a gift tax return. However, even these smaller gifts carry the carryover basis rule. If you gift $18,000 worth of Bitcoin that you bought for $180, the recipient's basis is $180, not $18,000. For highly appreciated assets, even small gifts can create significant tax consequences for the recipient.
One strategy some families use is gifting crypto with losses rather than gains. If you have cryptocurrency that has declined in value below your cost basis, gifting it to a family member in a lower tax bracket allows them to sell it and recognize the loss or wait for recovery. This is different from the wash sale considerations that apply to selling and rebuying, and can be a useful tax planning tool when combined with step-up basis strategies for appreciated assets.
π Confused About Crypto Gift Tax Rules?
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π IRC Section 1014: The Legal Foundation Explained
The step-up in basis rule is codified in Internal Revenue Code Section 1014. Understanding this legal foundation is important because it demonstrates that this is not a loophole or gray area but a deliberate policy choice that Congress has maintained for over a century. The rule applies to all property acquired from a decedent, and the IRS has confirmed through guidance that this includes cryptocurrency and other digital assets.
Figure 4: IRC Section 1014 provides the legal foundation for the step-up in basis rule, a provision that has been part of US tax law since 1921.
Section 1014(a) states that the basis of property in the hands of a person acquiring the property from a decedent shall be the fair market value of the property at the date of the decedents death. This is the core provision that creates the step-up. The law goes on to specify alternative valuation methods, including the optional alternate valuation date six months after death if the executor elects it and it results in a lower estate tax.
The policy rationale behind Section 1014 has been debated for decades. Originally, it was designed to prevent the forced sale of family farms and businesses to pay capital gains taxes at death. The argument was that requiring heirs to pay taxes on gains they never personally realized would be unfair and could break up family enterprises. While the economy has changed dramatically since 1921, Congress has repeatedly chosen to maintain this provision despite various reform proposals.
For cryptocurrency specifically, the IRS issued Notice 2014-21 which established that virtual currency is treated as property for federal tax purposes. This means all the general tax rules that apply to property transactions apply to cryptocurrency, including the step-up in basis rule under Section 1014. There is no special carve-out or exception for digital assets. Bitcoin, Ethereum, and other cryptocurrencies receive the same treatment as stocks, real estate, or any other capital asset.
π Key IRC Section 1014 Provisions for Crypto
| Provision | What It Means for Crypto |
|---|---|
| Section 1014(a)(1) | Basis equals FMV at date of death |
| Section 1014(a)(2) | Alternate valuation date option (6 months) |
| Section 1014(b)(1) | Applies to property acquired by bequest or inheritance |
| Section 1014(b)(6) | Applies to revocable trust property |
| Section 1014(e) | Anti-abuse rule for property gifted within 1 year of death |
One provision that crypto holders should be aware of is Section 1014(e), the anti-abuse rule. If you receive appreciated property as a gift and the donor dies within one year, and that property passes back to you or your spouse, you do not receive a step-up in basis. This prevents a scheme where someone gifts highly appreciated property to a dying relative specifically to get a step-up basis when it is inherited back. The property retains the original carryover basis in this situation.
The interaction between Section 1014 and community property laws in certain states creates an additional benefit. In community property states like California, Texas, and Arizona, both halves of community property receive a step-up in basis when one spouse dies, not just the deceased spouses half. This effectively doubles the step-up benefit for married couples in these states, making it even more valuable to hold appreciated crypto until death.
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⚠️ Exceptions and Limitations You Must Know
While the step-up in basis is incredibly powerful, it is not unlimited. There are several important exceptions and limitations that high-net-worth crypto holders must understand to avoid costly mistakes. Failing to account for these rules can result in unexpected tax bills, penalties, and even potential fraud accusations if done incorrectly.
The most significant limitation is the estate tax. While the step-up basis eliminates capital gains taxes on appreciated assets, it does not eliminate estate taxes. For 2026, the federal estate tax exemption is $13.61 million per person or $27.22 million for a married couple using portability. Estates exceeding these thresholds pay estate tax at rates up to 40 percent on the excess. For a crypto portfolio worth $20 million with a $13.61 million exemption, the estate would owe approximately $2.56 million in estate taxes, even though the heirs receive a stepped-up basis.
Income in Respect of a Decedent, or IRD, is another important exception. Certain types of income that the decedent earned but had not yet received do not get a step-up in basis. For cryptocurrency, this could potentially include staking rewards, mining income, or airdrops that were earned but not yet claimed before death. The tax treatment of these items is still evolving, and conservative planning suggests documenting the status of any pending crypto income carefully.
Irrevocable trusts present a complex situation. When you transfer assets to most irrevocable trusts, you give up ownership and control. As a result, those assets are generally not included in your estate and do not receive a step-up in basis at your death. There are exceptions for certain types of trusts, such as intentionally defective grantor trusts where the grantor retains some tax obligations, but the rules are intricate and require careful legal guidance.
π Step-Up Basis Exceptions Summary
| Exception | Effect on Step-Up | Planning Consideration |
|---|---|---|
| Irrevocable Trust Assets | Usually no step-up | Consider revocable trusts for crypto |
| Property Gifted Back Within 1 Year | No step-up (Section 1014(e)) | Avoid gifting to terminally ill relatives |
| Income in Respect of Decedent | No step-up | Document pending staking/mining income |
| Non-US Situs Property | Complex rules apply | Consult international tax advisor |
| Depreciated Property (losses) | Step-down to lower FMV | Consider selling losses before death |
State-level limitations are also important to consider. While all states follow federal rules for capital gains basis, some states have proposed or considered eliminating the step-up basis at the state level. As of January 2026, no major state has done so, but this remains a legislative risk that crypto holders should monitor. Additionally, some states have their own estate or inheritance taxes with lower exemption thresholds than the federal level.
Perhaps the most overlooked limitation is the step-down rule. When property has declined in value below its original cost basis, the same rule that creates step-up also creates step-down. If you bought Bitcoin at $60,000 and it is worth $40,000 at your death, your heirs receive a basis of $40,000, not $60,000. The $20,000 loss is permanently lost, it cannot be claimed by either you or your heirs. For assets in a loss position, it may be better to sell before death to realize the loss on your final tax return.
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π️ Strategic Planning: How to Maximize the Step-Up Benefit
Understanding step-up basis is only the first step. The real value comes from structuring your crypto holdings and estate plan to maximize this benefit while achieving your other financial goals. This section provides actionable strategies that high-net-worth crypto investors can implement immediately to protect their digital wealth for future generations.
Figure 5: Strategic planning can maximize the tax savings from step-up basis, potentially saving families hundreds of thousands of dollars in capital gains taxes.
The first strategy is to hold your most appreciated assets until death. This seems obvious but requires discipline. Many investors are tempted to sell and diversify, especially after large gains. While diversification is important, the tax cost of selling highly appreciated crypto can be substantial. Consider whether borrowing against your crypto holdings might achieve diversification goals without triggering capital gains. Several platforms now offer crypto-backed loans with reasonable terms.
The second strategy is to use a revocable living trust to hold your crypto. A revocable trust provides several benefits including probate avoidance, privacy, and professional management, while preserving the step-up in basis. Because you retain control over a revocable trust, its assets are included in your estate and receive the full step-up benefit. This is in contrast to most irrevocable trusts where the step-up may be lost.
The third strategy involves strategic asset location. If you have both highly appreciated crypto and crypto with minimal gains or losses, consider which assets to spend or sell during your lifetime versus which to hold for inheritance. Sell the low-gain or loss assets first for living expenses, allowing the high-gain assets to pass to heirs with a stepped-up basis. This asset location strategy can significantly reduce lifetime tax burden while maximizing inherited wealth.
π Step-Up Basis Maximization Strategies
| Strategy | Implementation | Benefit |
|---|---|---|
| Hold Appreciated Assets | Avoid selling high-gain crypto during lifetime | Full step-up eliminates all gains |
| Revocable Trust | Transfer crypto to revocable living trust | Probate avoidance + step-up preserved |
| Asset Location | Sell low-gain assets first for spending | High-gain assets pass tax-free |
| Spousal Planning | Title crypto as community property if eligible | Double step-up on first spouse death |
| Harvest Losses | Sell depreciated crypto before death | Capture losses that would otherwise be lost |
| Document Basis | Maintain detailed cost basis records | Heirs can prove step-up to IRS |
For married couples in community property states, a special strategy applies. When one spouse dies, both halves of community property receive a step-up in basis, not just the deceased spouses half. If you hold $2 million in appreciated Bitcoin as community property and one spouse dies, the entire $2 million gets a step-up, even though the surviving spouse still owns half. This can double the tax benefit compared to couples in common law states who must use other planning techniques to achieve similar results.
Documentation is perhaps the most important practical strategy. Your heirs will need to prove the fair market value of your crypto holdings on the date of your death to claim the stepped-up basis. For exchange-held crypto, historical pricing is usually available. For self-custody wallets, establish a system now for documenting values using reputable pricing sources. Consider using crypto tax software that maintains historical records and can generate reports for estate purposes.
Finally, coordinate your step-up basis planning with your overall estate plan. If your estate will exceed the federal exemption and owe estate taxes, more advanced strategies like dynasty trusts, charitable remainder trusts, or qualified personal residence trusts might be appropriate. These strategies involve trade-offs between estate tax savings and step-up basis benefits that require professional analysis for your specific situation.
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❓ FAQ: 30 Essential Questions About Step-Up Basis
Q1. What exactly is step-up in basis?
A1. Step-up in basis is a tax provision under IRC Section 1014 that resets the cost basis of inherited property to its fair market value on the date of death, eliminating capital gains taxes on appreciation that occurred during the decedents lifetime.
Q2. Does step-up basis apply to cryptocurrency?
A2. Yes. The IRS treats cryptocurrency as property, and all property acquired from a decedent qualifies for step-up in basis. Bitcoin, Ethereum, and all other cryptocurrencies are eligible for this tax benefit when inherited.
Q3. How much can step-up basis save in taxes?
A3. The savings depend on the appreciation amount. For highly appreciated crypto, savings can exceed 23.8 percent of the total gain in federal taxes alone. A $1 million portfolio with $950,000 in gains could save over $226,000 in federal capital gains taxes.
Q4. Is step-up basis a loophole?
A4. No. Step-up basis is a deliberate policy established by Congress in 1921 and has been maintained for over a century. It is codified in IRC Section 1014 and is completely legal when used properly.
Q5. What is the difference between gift basis and inheritance basis?
A5. Gifts carry a carryover basis, meaning the recipient inherits the donors original cost basis. Inheritances receive a stepped-up basis equal to fair market value at death. This creates dramatically different tax consequences.
Q6. Should I gift crypto to my children or let them inherit it?
A6. For highly appreciated crypto, inheritance is almost always better from a tax perspective. Gifting transfers your low cost basis to your children, while inheritance gives them a stepped-up basis that eliminates capital gains taxes.
Q7. Does step-up basis apply to crypto in a trust?
A7. It depends on the trust type. Revocable living trusts preserve the step-up basis because assets are included in the grantors estate. Most irrevocable trusts do not receive a step-up because assets are removed from the estate.
Q8. How is fair market value determined for crypto?
A8. Fair market value should be determined using prices from major exchanges on the date of death. Document the source and methodology used. For less liquid tokens, multiple pricing sources should be consulted.
Q9. What if crypto value drops after death?
A9. The stepped-up basis is locked at the date of death value. If the price drops afterward and heirs sell at a loss, they can claim a capital loss deduction. The loss offsets other gains or up to $3,000 of ordinary income annually.
Q10. Does step-up basis eliminate estate taxes?
A10. No. Step-up basis eliminates capital gains taxes, not estate taxes. Estates exceeding the federal exemption of $13.61 million in 2026 still owe estate tax at rates up to 40 percent on the excess.
Q11. What is the alternate valuation date?
A11. The executor can elect to value estate assets six months after death instead of at the date of death. This is useful if asset values have declined, as it reduces estate taxes. The alternate valuation then becomes the stepped-up basis.
Q12. Can I get step-up basis on crypto I gifted to a dying relative?
A12. No. Section 1014(e) prevents this abuse. If you gift appreciated property to someone who dies within one year and it passes back to you or your spouse, the property retains your original carryover basis.
Q13. How does step-up basis work in community property states?
A13. In community property states, both halves of community property receive a full step-up when one spouse dies. This effectively doubles the step-up benefit compared to common law states where only the decedents half gets a step-up.
Q14. What records should I keep for step-up basis?
A14. Keep documentation of fair market value on date of death from reputable sources, death certificate, estate documents showing ownership, and wallet addresses or exchange account information identifying the specific assets inherited.
Q15. Does step-up basis apply to NFTs?
A15. Yes. NFTs are treated as property for tax purposes and receive the same step-up in basis as other crypto assets. Valuation may be more challenging for illiquid NFTs and should use comparable sales or professional appraisal.
Q16. What about DeFi positions and step-up basis?
A16. DeFi positions including liquidity pool tokens and staked assets should receive step-up basis. Documentation of the positions and their fair market value at death is essential. Unclaimed rewards may be treated as income in respect of decedent.
Q17. Can step-up basis be lost through poor planning?
A17. Yes. Transferring crypto to an irrevocable trust, gifting during lifetime, or failing to properly document ownership can result in losing the step-up benefit. Professional estate planning is essential for significant holdings.
Q18. How does Form 1099-DA affect step-up basis claims?
A18. Starting in 2026, exchanges report cost basis to the IRS. When heirs sell inherited crypto, they must ensure the exchange has the correct stepped-up basis on file or report the correct basis on their tax return to avoid discrepancies.
Q19. What if I dont know the original cost basis?
A19. For inherited property, the original cost basis is irrelevant. The stepped-up basis is based solely on fair market value at death. You only need to document the value at death, not the decedents purchase price.
Q20. Does step-up basis apply to non-US citizens?
A20. US tax rules including step-up basis apply to assets owned by US citizens and residents regardless of where the assets are held. Non-US persons inheriting from US decedents may also benefit but face complex rules.
Q21. Can heirs sell inherited crypto immediately?
A21. Yes. There is no holding period requirement to qualify for step-up basis or long-term capital gains treatment on inherited property. Heirs can sell the day after inheriting and owe zero capital gains tax if the price has not changed.
Q22. What is step-down basis?
A22. If property has declined below its original cost basis at death, heirs receive a stepped-down basis equal to the lower fair market value. The loss is permanently lost and cannot be claimed by anyone. Consider selling loss positions before death.
Q23. How do I prove step-up basis to the IRS?
A23. Keep records showing the death certificate, estate documents proving inheritance, and fair market value documentation from the date of death. Price data from major exchanges, estate tax returns, or professional appraisals serve as evidence.
Q24. Does borrowing against crypto affect step-up basis?
A24. No. Taking a loan collateralized by crypto is not a taxable event and does not affect basis. The crypto retains its original basis during the loan and still qualifies for step-up at death as long as ownership is maintained.
Q25. What happens if crypto is in multiple wallets?
A25. Each asset in each wallet gets a separate stepped-up basis based on its fair market value at death. Document the contents and value of each wallet separately for the clearest records.
Q26. Can Congress eliminate step-up basis?
A26. Congress has the authority to modify or eliminate step-up basis, and various proposals have been introduced over the years. However, the rule has survived for over a century and any changes would likely include transition rules.
Q27. Should I move to a community property state for step-up benefits?
A27. For couples with large appreciated crypto holdings, community property states offer a double step-up benefit. However, relocation decisions involve many factors beyond taxes. Some states allow community property trusts without relocation.
Q28. How does step-up basis interact with state taxes?
A28. All states follow federal rules for capital gains basis calculation, so step-up basis applies at both federal and state levels. This provides additional savings in states with capital gains taxes, potentially another 0 to 13.3 percent.
Q29. What professional help do I need for step-up basis planning?
A29. An estate planning attorney can structure trusts and documents properly. A CPA or tax advisor can help with basis documentation and reporting. For large estates, a team approach is recommended to coordinate all aspects.
Q30. When should I start step-up basis planning?
A30. Now. The best time to implement estate planning is while you are healthy and have time to structure things properly. Waiting until health declines limits your options and may not leave enough time to implement optimal strategies.
⚖️ Legal and Financial Disclaimer
This article is for educational and informational purposes only and does not constitute legal, tax, or financial advice. Tax laws vary by jurisdiction and change frequently. The information presented reflects regulations as of January 2026 and may not reflect subsequent changes. Consult with qualified legal and tax professionals before making any estate planning decisions. Individual circumstances vary significantly, and strategies that work for one person may not be appropriate for another. The step-up in basis rules discussed are based on current US federal tax law and may be modified by future legislation.
πΌ️ Image Usage Notice
Some images in this article are AI-generated or stock illustrations used for educational purposes. They may not represent actual legal documents, tax forms, or financial instruments. For accurate information, please refer to official IRS publications and consult with licensed professionals.
π Article Summary & Author Information
The step-up in basis under IRC Section 1014 is one of the most powerful legal tax benefits available to cryptocurrency investors. By holding appreciated crypto until death rather than selling during life or gifting, families can eliminate hundreds of thousands of dollars in capital gains taxes. Key strategies include using revocable trusts, documenting fair market values meticulously, understanding the gift versus inheritance distinction, and coordinating with overall estate planning goals. With proper planning, your digital wealth can pass to the next generation tax-efficiently and securely.
Author: Cho Yun-jae | Digital Asset Information Blogger
Source: Official IRS documents, IRC Section 1014, Treasury regulations, and web research
Contact: davitchh@gmail.com
Tags: step-up basis, crypto inheritance tax, IRC Section 1014, cryptocurrency estate planning, tax-free inheritance, capital gains elimination, Bitcoin inheritance, crypto wealth transfer, estate tax planning, inherited crypto basis
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