What is a "step up" when you are talking about a gift tax?

Answer by  Att4372 (1704)

When you give someone property, the value is what you paid for it and not its current value. If you give someone property that cost you more than 13,000, you need to pay a gift tax. Gift tax is added to the value of your cost basis. Basis is increased (stepped up) by the amount of tax.

Answer by  tamarawilhite (17883)

The step up is the increase in taxable basis based upon the time the gift was made, not the value of the property when it was purchased. For example, an inherited home's taxable value is at time of receipt, not when it was bought.

Answer by  Att4372 (1704)

If you give a person an asset, it has a value, called the "basis" of the asset. If the gift is above a certain value (currently $13,000, the donor pays a gift tax to the Federal government. The amount of the tax paid is added to the value of the asset to determine new (stepped up) basis.

Answer by  tamarawilhite (17883)

It means that the amount you are taxed on is the market value of the property or item at the time it is gifted. This is a step up from the value the item had at the time it was purchased by the giver. If you then sell the item, your taxes are on the value it had when received.

Answer by  Chaneygirl (1755)

A step up means that the property is "stepped up" to the fair market value at the date of death. It is generally a term used with estate taxes versus gift taxes. Gifts are generally given at the gifter's cost. If you inherit property that cost the decedent $1000 but is worth $5000, $5000 is the new owner's "cost".

Answer by  HUNM25 (713)

Well say you brought a property 2 years ago and you gave it to someone as a gift. Well then the value of the property is the value of yesterday but doesn't reflect today. So you have to pay a gift tax for that.

Answer by  cynosure (376)

A gift has a tax basis - what was paid for it, minus any depreciation that was taken by its owner. When it is gifted, the value of the gift is "stepped up" to its current value, and the recipient pays current value minus the basis. Thereafter, the gift's new basis is its "stepped up" value.