1. What is Basis of Home Sold?

The basis of a home sold represents the total investment in the property for tax purposes. It is used to calculate capital gains when selling a home and includes the original purchase price plus improvements, minus any depreciation taken.

2. How Does the Calculator Work?

The calculator uses the basis calculation 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 represents your total investment in the property and is used to determine taxable gain when you sell.

3. Importance of Basis Calculation

Details: Accurate basis calculation is crucial for determining capital gains tax liability when selling a property. A higher basis results in lower taxable gain.

4. Using the Calculator

Tips: Enter the original purchase price, total cost of improvements, and any depreciation claimed. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as improvements?
A: Capital improvements that add value to the property or prolong its life, such as room additions, kitchen renovations, roof replacement, or new HVAC systems.

Q2: What is not included in improvements?
A: Routine maintenance and repairs that don't add significant value, such as painting, cleaning, or minor fixes.

Q3: How does depreciation affect basis?
A: Depreciation reduces your basis in the property, which increases your taxable gain when you sell.

Q4: What is adjusted basis?
A: Adjusted basis is your original basis plus improvements and minus depreciation - exactly what this calculator computes.

Q5: Why is basis important for home sales?
A: Basis determines your capital gain (Sale Price - Basis) which is subject to capital gains tax.