Inherited Crypto Taxes in the US 2026 – Step-Up in Basis Explained

Inheriting cryptocurrency comes with a powerful tax benefit: the step-up in basis can eliminate decades of capital gains. Here is how it works and what heirs need to do.

The Step-Up in Basis Rule

Under IRS rules, when you inherit an asset (including cryptocurrency), your cost basis is "stepped up" to the fair market value on the date of death. Any gain that accrued during the deceased's lifetime is effectively wiped out.

Example: Deceased bought Bitcoin at $5,000. Bitcoin is worth $80,000 at death. Heir inherits with a $80,000 basis. If heir sells at $82,000, they only owe capital gains on $2,000 – not $77,000.

Long-Term Capital Gains Automatically

Inherited assets are always treated as long-term capital gains regardless of how long either the deceased or the heir held them. The heir pays 0%, 15%, or 20% rates.

Estate Tax Threshold for 2026

The federal estate tax applies only to estates above the exemption threshold:

• 2025: $13.99 million per person ($27.98 million for married couples)
• 2026: The TCJA exemption is scheduled to sunset, dropping to ~$7 million (adjusted for inflation) unless Congress acts
• Rate: 40% on the taxable estate above the threshold

Most crypto investors will not owe estate tax. But large crypto fortunes (early Bitcoin holders) may be affected.

How Heirs Access Inherited Crypto

Inheriting crypto presents unique challenges:

• Exchange accounts: Contact the exchange with death certificate and probate documents
• Self-custody wallets: Requires access to seed phrase or private keys – critical to document
• Hardware wallets: Physical device plus PIN/seed phrase needed

Important: If crypto is lost due to inaccessible private keys, it cannot be claimed as a deductible loss.

What Heirs Must Report

• Determine FMV of inherited crypto on date of death (or alternate valuation date)
• This becomes your cost basis – document it carefully
• Report sales on Form 8949 using the stepped-up basis
• Mark the long-term checkbox (inherited = always long-term)

Estate Planning Tips for Crypto

• Document your crypto holdings and access instructions securely
• Include crypto in your will with specific instructions
• Consider a trust for large crypto holdings
• Review crypto beneficiary designations annually
• Consider Roth IRA for crypto – no estate tax and tax-free growth

Disclaimer: This article is for general informational purposes only and does not constitute tax advice. For individual tax advice, consult a licensed tax professional.