The step-up in basis is the quiet tax break at the center of inheritance. When you inherit property, its cost basis - the number capital gains are measured against - generally resets to the value on the date of death. Decades of appreciation simply stop being taxable gain.
The Arizona angle worth knowing: community property generally receives a step-up on the entire asset at the first spouse's death, not just the deceased spouse's half. That is the main reason married couples here often hold title as community property with right of survivorship rather than joint tenancy.
The step-up is also why 'just gift the house to the kids now' is usually bad advice: gifted property keeps your old basis, while inherited property gets the reset. Timing the transfer wrong can hand the IRS a bill the family never needed to pay.
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Educational information only, not legal advice. Terms have statutory details beyond these summaries - confirm your situation with a licensed professional.