That vertical dimension is always measured from the leading edge of the
step.

* Depending on the code *, there is a requirement for carrying the end
of the rail beyond the bottoma and top steps with exceptions for newel
posts. If the stairs are more than 30 inches above the surface below,
there is probably a requirement for a "guard" that is higher than the
rail. Then there is a requirement for the spacing between pickets and a
requirement for a non ladder arrangement of members.