Why You Need a Certified Appraisal Before Selling an Inherited Farm in Iowa

Noah Hopp

Iowa Land Specialist | Associate General Appraiser

When it comes to selling farmland in Iowa, especially if it’s been inherited, understanding the tax implications can save you or your heirs a significant amount of money. One of the most important—but often overlooked—steps in the process is obtaining a certified appraisal to establish what’s known as a step-up in basis.

What Is a Step-Up in Basis?

The step-up in basis is a tax provision that adjusts the value of an inherited asset—like farmland—to its fair market value (FMV) at the date of the original owner’s death. Instead of being taxed on the original purchase price (which could be decades old), the heirs are taxed on the value as of the date they inherited it.

Let’s say your grandparents bought the farm in 1950 for $50,000, and when you inherited it in 2020, it was worth $1,000,000. If you sell the farm for $1,050,000, without the step-up in basis, you’d owe capital gains taxes on $1,000,000 of gain. With a proper step-up in basis, you may only owe tax on $50,000.

Why a Certified Appraisal Is Critical

To take advantage of the step-up in basis, you must establish the value of the farm at the time of inheritance. That’s where a certified appraisal comes in. This formal valuation provides the IRS with documented, professional proof of the property’s value as of the date of death.

Without a certified appraisal:

• The IRS may challenge your claimed basis.
• You could owe more in capital gains taxes.
• It may be impossible to accurately document the FMV later on, especially if several years pass before the sale.

Why This Matters in Iowa

Farmland in Iowa has appreciated significantly over the decades. A large portion of wealth passed from one generation to the next is tied up in land. When it’s time to sell, the tax savings from a properly documented step-up in basis can be enormous.

Iowa families often hold onto farmland for generations, which makes proper documentation even more important. Appraisals also help in estate planning, trust administration, and making decisions about whether to keep or sell the land.

When to Get the Appraisal

The best time to get a certified appraisal is as soon as possible after the date of death—or before any sales activity begins. Waiting too long can lead to complications, especially if the market has fluctuated or if the property has changed in condition.

Final Thoughts

Selling an inherited farm in Iowa involves more than just finding a buyer. A certified appraisal is a critical step to ensure you establish a legitimate step-up in basis—and protect yourself or your heirs from unnecessary taxes. If you’re considering selling, talk to a qualified appraiser familiar with Iowa farmland values and a tax advisor to make sure everything is documented correctly.

Do you want to learn more?

Have you recently inherited land and don’t know what to do? Reach out to a local High Point Land Company agent. For more questions regarding land real estate, visit our YouTube Knowledge Center!

Growing up in New Hampton, IA Noah was the youngest of four brothers. Noah took every opportunity he could to spend time outdoors and was very involved in athletics. He attended Iowa State University, where he developed a love for farm ground. Noah married his 7th Grade sweetheart and moved to Cedar Falls, IA where he currently resides. Noah primarily focuses on helping Families handle estate sales and selling row crop ground located in Central Iowa. If you are looking to buy or sell farmland in Central Iowa or would like more information about the current market conditions, Noah looks forward to helping you reach your goals.