1. What is Adjusted Basis?

The adjusted basis of a property is its original cost plus the value of any improvements, minus any depreciation or losses. It's used to determine capital gains or losses when the property is sold.

2. How Does the Calculator Work?

The calculator uses the adjusted basis formula:

Where:

• Original Cost — The initial purchase price of the property
• Improvements — Any capital improvements that add value to the property
• Depreciation — Any depreciation claimed on the property
• Losses — Any casualty losses or other reductions in value

3. Importance of Adjusted Basis

Details: Knowing your property's adjusted basis is essential for calculating capital gains taxes when you sell the property. A higher adjusted basis means lower taxable gains.

4. Using the Calculator

Tips: Enter all amounts in USD. Original cost is required, while other fields default to zero if left blank. Values can include decimals for precise calculations.

5. Frequently Asked Questions (FAQ)

Q1: What counts as an improvement?
A: Improvements are permanent additions that increase property value (e.g., new roof, room addition), not routine maintenance.

Q2: How is depreciation calculated?
A: For rental properties, depreciation is typically calculated over 27.5 years using the straight-line method.

Q3: What types of losses reduce basis?
A: Casualty losses (from disasters) and theft losses that weren't reimbursed by insurance.

Q4: Does refinancing affect adjusted basis?
A: No, borrowing money against the property doesn't affect its basis.

Q5: How does adjusted basis affect taxes?
A: When selling, your taxable gain is sale price minus selling expenses minus adjusted basis.