Adjusted basis
Cost basis after adjustments for capital improvements added and depreciation taken. This is the number used to figure the taxable gain when a property sells.
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Free to set up. No credit card.Part 1 of 4
Why a seller cares
Your adjusted basis is what the gain on the sale is measured against: what you paid, plus improvements, minus any depreciation. For a rental it is smaller than you think, because depreciation has been taking it down every year.
Part 2 of 4
A simple example
You bought a rental for $200,000, added a $20,000 roof, and claimed $50,000 of depreciation. Your adjusted basis is $170,000.
| The piece | What it does to the basis |
|---|---|
| Purchase price, $200,000 | The starting point |
| The $20,000 roof | Adds; basis is $220,000 |
| $50,000 of depreciation claimed | Subtracts; basis is $170,000 |
Adjusted basis is the cost the tax code remembers, and depreciation has been quietly lowering it.
Part 3 of 4
What people get wrong
That the basis is what you paid. It moves with every improvement and every year of depreciation.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
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