7 Key Things CPAs Need to Know About Step-Up in Basis Valuations for Estate Tax Filings.

When preparing estate tax filings, CPAs are often responsible for coordinating real estate valuations that support the stepped-up basis of inherited property. Accurate and well-supported valuations are essential — not only to avoid audit delays but also to ensure clients are in the best possible tax position.

Here are 7 important considerations to keep in mind when ordering real estate appraisals for estate and tax purposes:

1. Ensure the Appraisal Meets IRS Standards

For IRS purposes, valuations should be performed by a licensed or certified real estate appraiser and must comply with USPAP (Uniform Standards of Professional Appraisal Practice). This ensures that the report includes the proper certifications, methodology, and documentation expected in tax-related filings.

Best practice: Always confirm the appraiser is familiar with estate and retrospective reporting standards.

2. The Effective Date Must Reflect the Date of Death

For step-up in basis purposes, the valuation must estimate the property’s fair market value as of the decedent’s date of death — not the current date. This is known as a retrospective appraisal.

Example: If the decedent passed away in October 2022, the appraisal must analyze market data relevant to that specific point in time.

3. Online Estimates and AVMs Are Not Sufficient

While tools like Zillow or Redfin provide general estimates, they do not meet the documentation or credibility standards required for IRS reporting. They cannot account for condition, market nuances, or retrospective dates.

Important note: AVMs are helpful for rough planning but shouldn’t be used for official filings.

4. Appraisals Should Clearly Support the Reported Value

When the IRS reviews an estate filing, they expect a real property valuation that is well-documented, clearly explained, and supported by market data. A high-quality report will include comparable sales, adjustments, and commentary that make the opinion of value easy to follow.

Best practice: Look for reports that are transparent in their analysis and include all necessary exhibits, especially when attached to IRS Form 706 or 1041.

5. Each Property Should Be Evaluated Independently

If the estate includes multiple real properties, each one should be evaluated on its own merits. This ensures accuracy and helps provide a clear, supportable basis for each asset in the estate.

Efficiency tip: Coordinating all properties with one qualified firm can streamline the process and improve consistency.

6. Property Condition and Unique Features Matter

An accurate valuation must consider more than square footage and location. It should reflect the property’s physical condition, updates or repairs needed, and any unique features that affect marketability or value.

Why it matters: An objective analysis helps ensure the step-up value aligns with fair market expectations and avoids over- or under-valuation.

7. Local Market Experience Is Incredibly Valuable

Every market is different — from neighborhood trends to buyer behavior. Appraisers with local expertise can better identify appropriate comparable sales, make informed adjustments, and explain their conclusions in a way that stands up to scrutiny.

Professional tip: Ask whether the appraiser specializes in your market area and has experience with retrospective and estate-related work.

Closing Thought: Partnering with the Right Appraiser Adds Value

As a CPA, the goal is to provide accurate, defensible filings that protect your clients. A well-supported appraisal is a key piece of that puzzle — especially when dealing with stepped-up basis valuations.

At REI Valuations & Advisory, we specialize in providing clear, compliant, and timely appraisals for estate tax, probate, and retrospective reporting across the Atlanta metro. If you’re looking for a local appraisal partner who understands the unique needs of CPAs and fiduciaries, feel free to reach out — we’re happy to assist.