Understanding Step-Up In Basis 
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Often times we are called to a home to complete a "Date of Death" property appraisal, typically because the client's accountant or attorney informed them that one was required. During our site visit, the concept of "Step-Up in Basis" is frequently brought up and not fully understood by the client. Below we attempt to explain what a Step Up Basis in Value is and we also provide an easy example to illustrate the concept. We chose properties in White Plains and Yonkers, but you can apply this concept to any property inherited in New York State.  

An appraisal is typically needed for any New York Property for stepped-up basis in the context of inheritance or estate planning to determine the fair market value (FMV) of an asset at the time of the decedent’s death.

When someone inherits property, for example in the Bronx, the stepped-up basis rule allows the beneficiary to adjust the tax basis of the asset to its current market value at the time of inheritance, rather than the original purchase price or cost basis. This can significantly reduce capital gains taxes if the asset appreciates in value over time. Real Estate in Westchester, Rockland or Putnam County has appreciated significantly over the years, especially in some towns and villages such as Rye, Bronxville, Larchmont, Bedford, and throughout the Hudson Valley region; Neighborhoods throughout NYC such as Astoria, Queens or Morris Park in "Da Bronx" are not exempt from historical and future market appreciation, which is why Step-Up Basis appraisals in New York are critical to reduce tax implications for an inherited property. Call 914-469-5946 to schedule your appointment or for a free consultation. 

Here's why a property appraisal is important in this context:

1. Accurate Determination of Value: The stepped-up basis is based on the FMV of the asset at the date of the decedent’s death. An independent appraisal by a licensed, certified and insured real estate appraisal professional is often necessary to ensure that the FMV is accurately determined, especially for assets that don't have a readily accessible market price (such as real estate, artwork, or collectibles).

2. Tax Compliance: The IRS requires proof of the FMV for tax purposes, and an appraisal provides the necessary documentation. If the estate is audited, the appraisal can serve as evidence to justify the value assigned to inherited assets.

3. Avoiding Penalties: If the value is overstated (which could result in paying less tax) or understated (which could trigger a penalty), having a formal appraisal reduces the risk of discrepancies or legal issues with the IRS.

In essence, the appraisal helps establish a fair, defensible value for the property, ensuring that the beneficiary is not paying more or less tax than they should.



Let me walk you through an example of how stepped-up basis works for real estate.

Example:

Imagine Jane inherits a house from her late aunt Sarah in White Plains or Yonkers.

1. Original Purchase Price (Cost Basis)

   • Sarah bought the house 30 years ago for $100,000.
   • Over the years, she made improvements, like adding a new roof and remodeling the kitchen, increasing the property’s value.
   • However, for simplicity, let’s focus on the initial price of $100,000.

2. Fair Market Value at Date of Death (Stepped-Up Basis)

   • When Sarah passes away, the house is worth $500,000. This is the fair market value (FMV) at the date of her death.

3. Stepped-Up Basis

   • Jane, the heir, will inherit the property with a stepped-up basis of $500,000. This means the new tax basis of the property is the FMV at the time of inheritance, not the original purchase price.
   • This stepped-up basis of $500,000 will be used when Jane sells the house later.

4. Selling the Property

   • Jane decides to sell the house 2 years later for $550,000.
   • Since her stepped-up basis is $500,000, she will pay taxes only on the $50,000 gain ($550,000 sale price minus $500,000 basis).

Without the stepped-up basis, Jane would have to calculate her gain based on the original purchase price of $100,000, meaning she would have faced taxes on a $450,000 gain (the difference between $550,000 and $100,000).

Key Takeaways:

• The stepped-up basis helps reduce the taxable gain when the New York property is sold by adjusting the basis to its value at the time of inheritance.
• This rule is especially beneficial for beneficiaries because it allows them to avoid paying capital gains taxes on the appreciation that occurred during the decedent’s lifetime.

This is why a real estate appraisal at the time of inheritance is important—it establishes the FMV and determines the stepped-up basis.

We are a New York State Court Approved Appraisal Firm, in additon to being approved with the Federal Housing Administration (HUD/FHA) to complete New York State Real Estate Appraisals.

With three appraisers on staff, we are available 6 days a week to assist you with any of your Real Estate Appraisal Needs. 

• Fees - Offering competitive fees starting at just $425 for any 1-4 family, coop or condo. Fees are determined by the complexity of the assignment. As an example a 1500 square foot home in South Jamaica may cost just $425, but a waterfront home in Whitestone with limited comparable data and more analysis required may require additional fees. We offer discounted appraisal fees for First Responders, Teachers, Special Needs families, & Military families. (immediate family only)

For a free consultation give us a call or click here. 914-469-5946

Westchester County, New York, is made up of several towns, villages, and cities. Here’s a list of them:

Cities in Westchester County:

1. Yonkers (largest city in Westchester County)
2. New Rochelle
3. Mount Vernon
4. Peekskill
5. White Plains 

Towns in Westchester County:

1. Bedford
2. Bronxville
3. Cortlandt
4. Eastchester
5. Greenburgh
6. Harrison
7. Irvington
8. Lewisboro
9. Mamaroneck
10. New Castle
11. North Castle
12. Ossining
13. Pelham
14. Pleasantville
15. Port Chester
16. Rye
17. Scarsdale
18. Sleepy Hollow
19. Somers
20. Tarrytown
21. Yorktown

Villages in Westchester County:

Westchester also has many villages within towns. Here are a few examples (the full list would be too long to fit here):

1. Ardsley (within Greenburgh)
2. Bronxville (within Eastchester)
3. Dobbs Ferry (within Greenburgh)
4. Elmsford (within Greenburgh)
5. Hastings-on-Hudson (within Greenburgh)
6. Irvington (within Greenburgh)
7. Larchmont (within Mamaroneck)
8. Mamaroneck Village (within Mamaroneck)
9. Mount Kisco (within New Castle)
10. Pelham Manor (within Pelham)
11. Pleasantville (within Mount Pleasant)
12. Port Chester (within Rye)
13. Rye Brook (within Rye)
14. Sleepy Hollow (within Tarrytown)
15. Tuckahoe (within Eastchester)
16. Tarrytown (within Greenburgh)

Westchester County has a mix of suburban and urban areas, with various communities that offer different lifestyles and amenities.