IRS step-up & date-of-death appraisals in Baltimore

The tax question is about a past date, and so is the report.

A step-up appraisal goes by other names too: date-of-death appraisal and retrospective appraisal. It looks back to a past effective date (most often the owner's date of death) and values a Baltimore home with the condition it had and the sales of that period. Before you call, note the address, the reason for the report and the effective date your tax adviser chose.

Get a date-of-death appraisal quote | Call (443) 909-2324

What the basis rule asks for

The IRS sets an heir's starting basis, as a general rule, at the inherited property's fair market value when the decedent died, and that rule applies even if no estate tax return is filed. The alternate valuation date comes into play only if the executor files Form 706 and chooses it on that return (IRS: gifts and inheritances). If you later sell for more than your basis, you have a taxable gain.

The new basis follows the value at death, whether that turns out above or below what the owner paid, so "step-up" names a reset rather than a promised saving. In most cases the inheritance itself is not income to the heir (IRS Publication 525). Under a 2015 law, in certain circumstances, an heir's basis has to be consistent with the value finally set for federal estate tax purposes. Let your tax adviser fix the effective date and the use of the report before it is ordered.

What the current market leaves unanswered

The effective date

The order date, the inspection date and the valuation date are usually different. The research targets the market as it stood around the valuation date.

The condition then

A house renovated since the death has to be described as it was, using dated photos, listings, inspection reports and invoices.

The evidence for that period

Later records can help confirm earlier facts, but the analysis has to address the market of the effective date. The appraiser explains what evidence was used and why.

Where Maryland law meets a basis appraisal

• Maryland estate tax. Maryland's exclusion is $5,000,000 for deaths on or after January 1, 2019, plus any unused amount carried over from a deceased spouse (Tax-General § 7-309), far below the federal threshold of $15,000,000 for a U.S. citizen or resident who dies in 2026. Where a Maryland return is required, it is filed with the Comptroller 9 months after the date of death (§ 7-305). When no federal return is required, an alternate valuation election made on a timely Maryland return is treated as the federal election; when a federal return is filed, the Maryland election must match the federal one (§ 7-309(b)(4)).
• Maryland inheritance tax. For inheritance tax, the value of property is generally the appraised value required on the probate inventory (§ 7-207), and Maryland's probate statute ties that inventory to the date of death. If an inventory was filed for a Baltimore City estate, the copy at the Register of Wills for Baltimore City shows the value reported then, with the name and address of any appraiser used. Bring a copy.
• Spouses who held title together. The IRS lists the community property states in Publication 555, and Maryland is not on that list. If the house was owned jointly with a husband or wife, your adviser should work out how much of it receives a new basis, since the answer is not always the whole house.
• The assessment is a different number. The Maryland Department of Assessments and Taxation (SDAT) sets a property tax value fixed as of a January 1 date of finality. It answers a different question from a date-of-death appraisal.

Remember that federal law has no inheritance tax; the estate tax is owed by an estate, and only by one above the threshold for its year.

Documenting the earlier house

Renovation changes what a buyer would have paid. If the kitchen, the roof or the basement was redone after the death, the appraiser needs evidence of the earlier state: dated photographs, a listing from before the work, an inspection report, a contractor's invoice or a permit record. Give us a short timeline of the changes. The appraiser weighs that material in forming the opinion of value, and the report names any assumption the records cannot settle.

Records that help

From request to report: a date-of-death assignment

1. Pin down the date and purpose. Tell us the property, the valuation date, who will rely on the report and when you need it; scope, fee and delivery are put in writing before anything starts.
2. Gather evidence of the earlier house. If an inspection is useful, access is arranged, and you provide what records exist about the condition back then.
3. Research that period. The appraiser looks at sales and market conditions from around the valuation date and shows how they lead to the value.
4. Proofread the report you receive. Review the valuation date, the stated use and the assumptions before the report goes to your adviser.

Fee and delivery for a date-of-death appraisal

Past-date research takes its own time, so mention any filing date your adviser is working toward. Ask for a written scope, fee and delivery estimate for your property, intended use and deadline. One date-of-death value may serve a probate inventory, an estate settlement and a basis question; ask your adviser and the appraiser whether a single report can be written for all of those users. The probate appraisal page covers Maryland's inventory rules, the estate appraisal page covers settlement and Maryland's death taxes, and our appraisal services lists everything else.

Next step: the Baltimore address and the effective date

Send the Baltimore address, the purpose and the valuation date your adviser gave you. We will reply with the scope, the fee and what comes next.

Get a date-of-death appraisal quote | Call (443) 909-2324

Written with AI assistance for The Appraising Group Baltimore. This page explains how a date-of-death appraisal works; it does not value any property or give tax advice.