Taxes on selling inherited land: the stepped-up basis.

The short answer

When you inherit land, its tax basis generally "steps up" to the land's fair market value at the owner's death — so if you sell soon after, there's often little or no taxable gain at all. You are not taxed on what your parent or grandparent originally paid decades ago; federal capital gains apply only to appreciation after the date of death. A parcel worth $80,000 at death and sold for $85,000 produces a $5,000 gain — not an $80,000 one.

Neither Louisiana nor Mississippi currently imposes a state inheritance or estate tax, and the federal estate tax only touches estates worth well into the millions. For most families selling inherited acreage, the entire tax conversation comes down to documenting the date-of-death value and reporting the sale. This guide is general information, not tax advice — a CPA should confirm how the rules apply to your family.

The rule that matters

The stepped-up basis, in one worked example.

“Basis” is tax language for your starting point — what you’re treated as having paid for something. Sell for more than your basis, and the difference is a capital gain; that’s what gets taxed.

When land is inherited, the heirs’ basis generally becomes the land’s fair market value on the date the owner died — the basis “steps up” from whatever the owner originally paid. The appreciation across the decades the owner held it is simply not the heirs’ taxable problem.

Worked through: your father bought forty acres in 1982 for $20,000. At his death it was worth $120,000. The family sells it a year later for $125,000. The taxable gain is $5,000 — sale price minus the stepped-up $120,000 basis — not the $105,000 the family feared. Sell it for $120,000 or less, and there may be no gain at all. This single rule is why “we’ll lose half to taxes” is almost never true for inherited land.

One more piece of good news that surprises people: gains on inherited property are treated as long-term no matter how quickly the heirs sell — so even a sale months after the death gets the lower long-term capital-gains rates, not the ordinary-income rates.

What Louisiana and Mississippi add

State taxes: less than you’d think.

Neither Louisiana nor Mississippi currently imposes an inheritance tax or a state estate tax — the heirs don’t owe the state a tax for inheriting. The federal estate tax exists, but its exemption sits well into the millions of dollars per person; the estates it touches are rare, and if yours might be one of them, you’re already in territory where an estate attorney and CPA should be steering.

What families in both states do encounter: ordinary property taxes that kept accruing while the estate sat unresolved. Those typically get settled from the proceeds at closing — how that works in a sale to us is covered here — and they’re a closing-table item, not an income-tax one.

Do this now

The one document to get, and the questions for your CPA.

Get the date-of-death value on paper. Everything above turns on being able to show what the land was worth when the owner died. A licensed appraiser can value it as of that date — even retrospectively, years later. It costs a few hundred dollars and can save the family real money and real arguments.

Then bring a CPA three questions. What’s our stepped-up basis and can we document it? Does anything unusual apply — the land was in a trust, someone already owned a share before the death, timber was sold separately? And how does each heir report their share of the sale? Those answers are specific to your family, which is exactly why this guide stops where it does: we buy land — here’s how that works — and we’ll happily coordinate with your CPA and attorney, but the tax call is theirs to make.

Questions & answers

Asked by nearly every family we work with.

We inherited the land years ago and it's gone up in value. What then?

The gain is measured from the value at the date of death, not from the sale of the century your grandfather got in 1975. Appreciation since the death is taxable when you sell — and gains on inherited property are treated as long-term regardless of how briefly you've held it, which means the lower capital-gains rates.

How do we prove what the land was worth when the owner died?

Documentation — ideally an appraisal or a written valuation as of the date of death. If the death was recent, get this done now while it's easy; if it was years ago, an appraiser can usually prepare a retrospective valuation. It's the single most useful tax document an heir can have.

Does each heir pay tax on the whole sale?

No — each co-owner reports their share. If four heirs each own a quarter and the sale produces a $12,000 total gain, each reports their portion, not the whole.

Do back property taxes change the income-tax picture?

They're a different bill. Overdue parish or county property taxes typically get paid out of the sale proceeds at closing — they reduce what the family nets, but they're not part of the capital-gains math. You don't have to clear them before selling to us.

Sources & review: General federal tax treatment of inherited property (stepped-up basis) as commonly applied; state facts current as of publication. This is general information, not tax or legal advice — confirm your situation with a CPA or tax attorney before acting. Published August 2026 · Updated August 2026.