What Happens to Property Value When Someone Passes Away? Understanding the Stepped-Up Basis in Virginia
When families in Northern Virginia inherit a home, one of the first questions they face is, “What number do we use for taxes?” The answer usually begins with the stepped-up basis—the property’s fair market value as of the decedent’s date of death. For most heirs, that number is established by a professional Date of Death (DOD) appraisal, and it becomes the baseline for future capital gains calculations if the home is sold. The IRS explains this framework for executors and heirs in Publication 559 and related guidance. IRS
Why the “date of death” number matters
Assume a parent bought an Arlington Cape Cod for $300,000 decades ago. At the date of death it’s worth $850,000. If the heir sells for $880,000, capital gains are generally calculated on $30,000—not on the entire appreciation since purchase—because the basis “steps up” to fair market value at death. Getting that fair market value right (and well-documented) protects the estate and the heir from avoidable tax and audit issues. The IRS expects the value used for basis to be consistent with what’s reported to the government and the beneficiary. IRS
Virginia’s role (and what it isn’t)
Virginia does not currently impose a state estate or inheritance tax. That was effectively repealed in 2007, so most of the tax analysis for inherited real estate in Virginia focuses on federal rules and future capital gains—another reason an accurate DOD appraisal is so useful. tax.virginia.gov
“Can’t we just use the county assessment?”
County assessments (for example, Arlington’s) are mass appraisals updated on an annual valuation date (January 1). That’s not the same as establishing market value on a specific past date tied to a decedent’s death—which is what the IRS and your CPA care about. Relying on a tax assessment or a ballpark figure is a common (and costly) mistake. Arlington, VA
What a professional DOD appraisal includes
A defensible report is retrospective—it reconstructs the market on the effective date using archived MLS data, comparable sales bracketing that date, and clear, supported adjustments. It also includes a statement of scope, assumptions, and a narrative analysis that meets USPAP (Uniform Standards of Professional Appraisal Practice). USPAP is the national standard; it’s what courts, the IRS, and fiduciaries expect. The Appraisal Foundation
Why you should hire a certified appraiser
If the value is ever questioned, a one-page letter won’t cut it. Virginia’s Tax Commissioner has explicitly said an appraiser’s letter is not sufficient evidence in place of a real appraisal report. When the stakes involve taxes and estate accounting, “good enough” isn’t good enough—use a certified Virginia appraiser who delivers a USPAP-compliant retrospective report. tax.virginia.gov
Bottom line: a professional DOD appraisal doesn’t just provide a number—it provides defensible documentation that protects heirs, executors, and advisors in Arlington, Alexandria, Fairfax, Falls Church, McLean, Vienna, and beyond.