1. What Is Basis For Home Sale?

Basis represents the total investment in your home for tax purposes when you sell it. It includes the original purchase price plus any capital improvements, minus any depreciation taken.

2. How Does The Calculator Work?

The calculator uses the basis formula:

Where:

• \( Purchase\ Price \) — Original cost of purchasing the home
• \( Improvements \) — Capital improvements made to the property
• \( Depreciation \) — Depreciation claimed on the property

Explanation: The basis calculation helps determine the capital gain or loss when selling a home, which affects your tax liability.

3. Importance Of Basis Calculation

Details: Accurate basis calculation is crucial for determining taxable gain on home sales, maximizing tax benefits, and ensuring compliance with IRS regulations.

4. Using The Calculator

Tips: Enter all amounts in USD. Include only capital improvements (not routine maintenance) and only depreciation actually claimed on tax returns.

5. Frequently Asked Questions (FAQ)

Q1: What counts as a capital improvement?
A: Capital improvements add value to your home, prolong its life, or adapt it to new uses (e.g., room additions, kitchen remodel, new roof).

Q2: What doesn't count as improvements?
A: Routine repairs and maintenance (painting, fixing leaks, replacing broken items) do not increase your basis.

Q3: How does basis affect taxes?
A: Higher basis reduces your taxable gain when you sell: Selling Price - Basis = Taxable Gain.

Q4: What about home sale exclusion?
A: You may exclude up to $250,000 ($500,000 if married) of gain from income if you meet ownership and use tests.

Q5: Should I keep records of improvements?
A: Yes, maintain detailed records of all improvements with receipts and documentation for tax purposes.