After an owner’s passing, the home must be appraised and the cost basis for the house becomes the value assigned by the appraiser. This is known as the stepped-up basis. You can avoid capital gains taxes on inherited property by minimizing the time for appreciation. Selling immediately after inheritance typically results in minimal capital gains tax because there’s little time for the property to appreciate beyond its stepped-up basis. If you hold onto the house and the value appreciates you will pay capital gains tax on the difference between the stepped-up value and the price it sold for. There are no capital gains exemptions for inherited homes.