A surviving spouse preparing to sell needs to establish the home's tax basis from the ownership and estate records. The inherited share and the survivor's existing share may have different tax histories.
The basis of a jointly owned home
If the two of you owned the house together as a married couple, one half of its value goes into the estate, and that half takes a new basis equal to its value at the date of death, which is usually higher than what was paid but does not have to be. Your own half keeps the basis it always had.
The version where the entire house steps up is a community property rule, and the IRS list of community property states does not include Indiana.
The inherited-property basis rules
Publication 551, Basis of Assets, revised December 2025, states that "Generally, the basis of property inherited from a decedent is one of the following." The first on its list is "The FMV of the property at the date of the individual's death." The others are the value on an alternate valuation date if the estate's personal representative chooses it, a special use valuation for farm or closely held business real property, and an adjustment where part of the value was excluded as a qualified conservation easement. FMV is fair market value.
The part that applies to a married couple's house
The publication has a separate rule for a house a married couple held together. It calls it a qualified joint interest, and defines it as "any interest in property held by married individuals as either of the following": "Tenants by the entirety" or "Joint tenants with right of survivorship if the married couple are the only joint tenants."
For that kind of ownership it says: "Include one-half of the value of a qualified joint interest in the decedent's gross estate. It doesn't matter how much each spouse contributed to the purchase price. Also, it doesn't matter which spouse dies first."
And on your basis afterward: "As the surviving spouse, your basis in property you owned with your spouse as a qualified joint interest is the cost of your half of the property with certain adjustments. Decrease the cost by any deductions allowed to you for depreciation and depletion. Increase the cost by your basis in the half you inherited."
So the arithmetic is two halves with two different histories. Half of what you paid, decades ago, plus half of what the house was worth on the date of death.
Where the whole house does step up
Publication 551 names the community property states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In those states, it says, the total value of the community property, "even the part belonging to the surviving spouse," generally becomes the basis of the entire property, provided at least half the community interest was includible in the decedent's gross estate. Indiana is not on that list.
If you have been told the whole house reset, that rule is where the idea comes from, and it is not the rule for a house owned here. A couple who once lived in a community property state, or bought property there, can have a different answer for that property, which is one more reason the CPA sees the whole ownership history.
One trap worth knowing about
The publication also carries an exception that catches well meant estate planning. The step up does not apply to appreciated property that you or your spouse gave to the decedent within one year before the death. In that case, it says, "Your basis in this property is the same as the decedent's adjusted basis in the property" immediately before death.
Property moved between spouses in a last year is exactly the situation that rule is written for.
There is a second clock, and it is two years
Basis is only half of what decides the tax on a sale. The exclusion is the other half. Publication 523, Selling Your Home, for use in preparing 2025 returns, says a surviving spouse may be able to increase the exclusion from $250,000 to $500,000 where the home is sold within two years of the death of the spouse, the survivor has not remarried at the time of the sale, neither spouse took the exclusion on another home sold less than two years before this sale, and the ownership and residence tests are met, counting the late spouse's periods of ownership and residence.
That two year window is the only part of this that is on a deadline, and it is the part families find out about late. It is a reason to have the conversation in the first year rather than the third, even if the answer that year is stay.
The two-year period is a reason to obtain the tax calculation while the options are open. The household can then weigh the effect alongside its other reasons for staying or selling.
What your basis is, what the step up is worth and what the sale would do to your return belong to your CPA, and the figures come off the estate's records and your own. How the house was titled, and whether it was held as tenants by the entirety, is on the deed and belongs to your attorney.
The notes on capital gains tax when you sell and on who should be in the room when a parent is deciding cover the ground on either side of this one, and the sellers page sets out how a listing is prepared.
Sources: IRS Publication 551, Basis of Assets, revised December 2025, the Inherited Property, Qualified Joint Interest and community property sections; and IRS Publication 523, Selling Your Home, for use in preparing 2025 returns, on the surviving spouse exclusion. Read at source, October 9, 2026.
This note is general. It is not tax or legal advice. What applies to your house depends on how it was titled, on the estate's records, and on the year a sale closes.