The step-up in basis on an inherited house resets your cost basis to the fair market value on the date of death, which is why obtaining a professional appraisal or a documented broker's opinion of value promptly, rather than relying on the county's tax-assessed value, matters even if you have no immediate plan to sell. If you sell shortly after inheriting, gain or loss is typically small since the sale price is close to the stepped-up basis. If you keep the property and it appreciates further after the date of death, that additional appreciation from the date of death forward is what's taxable when you eventually sell, so the date-of-death value is what you need documented regardless of what you decide to do with the house.

Arizona's community property rules add a meaningful nuance for a surviving spouse. In a community property state, a jointly owned home often receives a full double step-up, both the deceased and surviving spouse's shares reset to fair market value at the first spouse's death, not just the half attributable to the spouse who died. That's a better outcome than the partial step-up that applies in common-law states, but the documentation and titling history need to support it, which is worth confirming with an estate attorney or CPA rather than assuming.

The practical decision on the house this year is straightforward: get a qualified appraisal or broker's opinion of value dated as close to the date of death as possible, decide whether to sell, rent, or keep the property based on your own goals rather than tax pressure, since the tax cost of any of the three options is now anchored to a fresh basis, and keep that appraisal with your permanent tax records since you may need to prove the stepped-up basis years later when the property is eventually sold.

An inherited IRA has no step-up in basis at all. Every distribution is ordinary taxable income at your own marginal rate, and under the SECURE Act, most non-spouse beneficiaries, adult children and most trusts among them, must fully distribute the account by December 31 of the tenth year after death. If the original owner had already reached their own required minimum distribution age, annual RMDs are also required in years one through nine of that window, not just a single lump-sum option available at year ten, a detail the IRS's 2024 final regulations confirmed and that surprised many beneficiaries who assumed they could simply wait.

Not every beneficiary is subject to the 10-year rule. Spouses have more flexible options, including treating the IRA as their own. Minor children of the original owner, disabled or chronically ill beneficiaries, and beneficiaries not more than 10 years younger than the original owner qualify as eligible designated beneficiaries and can generally stretch distributions over their own life expectancy instead. Confirming which category applies to you is the first step, before assuming the 10-year clock is running.

The real planning decision on the IRA is how you spread withdrawals across the 10-year window, subject to any required annual amounts, to avoid stacking a decade of taxable income into one or two high-bracket years. That means weighing your own working years, any high-income years you expect during the window, and how a large withdrawal in a given year could affect your own Medicare IRMAA exposure once you're old enough for that to matter.

For the house, get a written appraisal or valuation dated at or near the date of death this year, before deciding whether to sell, rent, or keep it, that documentation is what protects the stepped-up basis later.

For the IRA, map out a 10-year withdrawal plan against your own expected income in each of those years rather than defaulting to either waiting until year 10 or taking a large amount immediately, both are usually the wrong answer for most beneficiaries.

• Assuming an inherited IRA gets the same step-up in basis as an inherited house, it does not, every withdrawal is ordinary taxable income regardless of when the original owner contributed the money.
• Selling an inherited house without documenting the date-of-death value first, and later struggling to prove the stepped-up basis to the IRS.
• Assuming the SECURE Act's 10-year rule means you can wait until year 10 to take anything, if the original owner had already started RMDs, annual distributions are usually required in years one through nine as well.
• Not checking whether you qualify as an eligible designated beneficiary, spouse, minor child, disabled or chronically ill individual, or someone less than 10 years younger than the deceased, before assuming the 10-year rule applies to your situation.