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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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
In your Room, this word explains itself where it appears.
Your Room defines adjusted basis in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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