Your adjusted basis is the original cost or value of an asset (like a home, car, or stock) plus or minus certain adjustments made over time. These adjustments can include improvements, depreciation, or other changes that affect the asset’s value for tax purposes.
Why It Matters:
The adjusted basis is used to figure out gain or loss when you sell or dispose of the asset.
Gain or Loss = Sale Price – Adjusted Basis
🛠️ Example:
You bought a rental property for $200,000.
- You spent $20,000 on improvements.
- You claimed $10,000 in depreciation.
Adjusted Basis = $200,000 + $20,000 – $10,000 = $210,000
If you sell the property for $250,000, your taxable gain is:
$250,000 – $210,000 = $40,000
If you claimed depreciation (or could have), your adjusted basis must be reduced—even if you didn’t claim the deduction.
🛠️ Example:
If you bought a home for $200,000 and later spent $30,000 on improvements, your adjusted basis is generally $230,000.
NOTE: We use the information you enter to calculate adjusted basis but do not automatically know your improvement or depreciation history.