Cost basis
The total amount invested in a property for tax purposes: purchase price plus certain closing costs and capital improvements. Used to figure capital gains when you sell.
Every term like this one lights up in the step you're on.
Free to set up. No credit card.Part 1 of 4
Why a seller cares
Cost basis is where the gain calculation starts: what you paid plus certain closing costs and every capital improvement. The higher it is, the smaller the taxable gain, and receipts are what hold it up.
Part 2 of 4
A simple example
You paid $180,000, spent $3,000 on closing costs that count, and added $30,000 of improvements. Your basis is $213,000.
| The piece | Counts toward basis? |
|---|---|
| The purchase price | Yes |
| Title fees and recording costs at purchase | Yes |
| Improvements with receipts | Yes |
| Mortgage interest and repairs | No |
Basis is purchase price plus what you added to the house, and the receipts are the proof.
Part 3 of 4
What people get wrong
That the mortgage has anything to do with it. Basis is about what the house cost, not how it was financed.
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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