The step-up resets the clock
When you inherit property, its basis is generally "stepped up" to fair market value at the date of death. That reset can eliminate the deferred capital gain and the depreciation recapture the previous owner would have owed.
Depreciation starts fresh
As the heir, you begin a new depreciation schedule based on the stepped-up basis. The prior owner's accumulated depreciation doesn't carry over to you.
Why this drives estate planning
This is the engine behind "swap till you drop": defer via 1031 exchanges during life, then let heirs take a step-up at death — potentially erasing a lifetime of deferred recapture.
Frequently asked questions
Do heirs pay depreciation recapture?
Usually not on the decedent's depreciation — the stepped-up basis at death typically eliminates it. Depreciation the heir later claims can be recaptured when they sell.
Does inherited property get a new depreciation schedule?
Yes, based on the stepped-up fair market value at the date of death.
Sources
- IRS Topic No. 409 — Capital Gains and Losses
- IRS Publication 544 — Sales and Other Dispositions of Assets
- IRS Publication 946 — How to Depreciate Property
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.