Asset Adjusted Basis Calculator
When you sell an asset, the IRS does not tax the full sale price. It taxes your gain, and your gain is the sale price minus your adjusted basis: what you paid, plus the improvements you added, minus the depreciation you claimed and any casualty losses. Get the basis wrong and you either overpay tax or underreport income.
The Asset Adjusted Basis Calculator below walks the standard IRS computation. Enter your original cost, capital improvements, depreciation taken, and casualty or theft losses, and it returns your adjusted basis with the increases and decreases shown separately, so the number is audit-ready and traceable.
Quick Answer
Key takeaways
- Basis starts at cost (26 USC 1012) and is adjusted under 26 USC 1016: up for improvements, down for depreciation and losses.
- Only capital improvements add to basis; routine repairs are deducted in the year paid and never touch basis.
- Depreciation reduces basis whether or not you claimed it ("allowed or allowable"), a trap for landlords who skipped depreciation.
- Inherited property generally gets a stepped-up basis to fair market value at death (26 USC 1014), wiping out the decedent's gain.
How basis moves over an asset's life
Basis is not a fixed number; it is a running balance that follows the asset from purchase to sale. IRS Publication 551 lays out the lifecycle, and the calculator mirrors it exactly:
Start at cost. Purchase price plus sales tax, freight, installation, and settlement costs. This is your unadjusted basis under 26 USC 1012.
Add capital improvements. A new roof, an addition, a full system replacement: anything that betters, restores, or adapts the property. Keep receipts; the IRS requires them.
Subtract depreciation. Every dollar of depreciation allowed or allowable comes off basis. For residential rental property the recovery period is 27.5 years (IRS Publication 946).
Subtract casualty and theft losses. Deductible losses, net of insurance reimbursements, reduce basis under 26 USC 1016.
At sale: gain = amount realized − adjusted basis. The result feeds your capital gain computation (IRS Publication 544). A capital gains calculator continues from here.
Worked example, checked against this exact tool
Enter the pre-filled defaults and click Calculate. This is a rental house bought for $250,000, with a $40,000 addition and $30,000 of depreciation claimed:
| Item | Effect on basis | Running basis |
|---|---|---|
| Purchase price (2015) | starting point | $250,000 |
| Kitchen addition + new roof (2019) | +$40,000 | $290,000 |
| Depreciation claimed (2015-2024) | −$30,000 | $260,000 |
| Casualty losses | $0 | $260,000 |
Sell that house for $400,000 and the taxable gain is $140,000 ($400,000 − $260,000), not $150,000. The $40,000 of documented improvements saved tax on $40,000 of gain. Lose the receipts and the IRS position is that the improvements never happened.
What counts as an improvement (and what does not)
The most expensive basis mistake is misclassifying work. The IRS tangible-property regulations use the BAR test: an expense is a capital improvement if it creates a Betterment, an Adaptation to a new use, or a Restoration. Everything else is a repair, deducted in the year paid and never added to basis.
What competing calculators miss
Most adjusted-basis calculators are four boxes and a subtract button. The gaps that cost users real money:
No "allowed or allowable" warning. Depreciation reduces basis even for years you did not claim it. Competitors never mention this, so landlords who skipped depreciation think their basis is higher than the IRS says it is.
No repair-versus-improvement guidance. Users type repainting costs into the improvements box and inflate their basis with numbers the IRS would disallow. This page applies the BAR test explicitly.
No stepped-up basis mention. Inherited property is the most common basis situation after home sales, and most calculators ignore 26 USC 1014 entirely.
No receipt discipline. Basis is only as good as its documentation. Ours says plainly: no receipt, no basis increase, in an audit.
Frequently asked questions
Cost basis is what you paid (26 USC 1012). Adjusted basis is cost basis after the 26 USC 1016 adjustments: plus improvements, minus depreciation and casualty losses. Gain or loss is always figured on the adjusted basis, never the original cost.
Yes. The rule is "allowed or allowable": basis is reduced by depreciation you were entitled to take, whether or not you took it. If you skipped years, talk to a tax professional about filing Form 3115 for a catch-up adjustment rather than amending old returns.
No. Routine maintenance that keeps the property in operating condition is a deductible repair, not a capital improvement, and never touches basis. The exception is repair-type work done as part of a larger renovation, which gets pulled into the improvement.
Under 26 USC 1014, property acquired from a decedent generally takes a basis equal to its fair market value at death, wiping out the unrealized gain. If you inherit a house bought for $100,000 now worth $400,000, your basis is $400,000 and a prompt sale produces little or no gain.
In ordinary cases, no: it signals an error, usually depreciation exceeding cost plus improvements. (Partnership interests have their own negative-basis mechanics.) If the calculator shows a negative number, re-check that casualty losses are net of insurance and that depreciation figures are lifetime totals, not annual.
Settlement statements for the purchase, contracts and paid invoices for every improvement, depreciation schedules from your tax returns, and insurance records for casualty losses. IRS Publication 551 stresses keeping basis records as long as you own the asset plus the limitations period after sale.
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References
- Internal Revenue Service, Publication 551, "Basis of Assets" - cost basis, increases and decreases to basis, and recordkeeping requirements. IRS Publication 551: Basis of Assets. Accessed October 19, 2026.
- Internal Revenue Service, Tax Topic 703, "Basis of Assets" - summary of basis rules for determining gain or loss. IRS Tax Topic 703: Basis of Assets. Accessed October 19, 2026.
- Internal Revenue Service, Publication 544, "Sales and Other Dispositions of Assets" - figuring gain or loss from adjusted basis. IRS Publication 544: Sales and Other Dispositions of Assets. Accessed October 19, 2026.
- Internal Revenue Service, Publication 946, "How to Depreciate Property" - MACRS recovery periods including 27.5 years for residential rental property. IRS Publication 946: How to Depreciate Property. Accessed October 19, 2026.
- Internal Revenue Service, Publication 523, "Selling Your Home" - improvements that add to basis, and repairs folded into larger renovations. IRS Publication 523: Selling Your Home. Accessed October 19, 2026.
- 26 U.S.C. 1011, "Adjusted basis for determining gain or loss" (Cornell LII) - statutory definition of adjusted basis. 26 USC 1011: Adjusted Basis. Accessed October 19, 2026.
- 26 U.S.C. 1012, "Basis of property - cost" (Cornell LII) - starting basis is cost. 26 USC 1012: Basis of Property. Accessed October 19, 2026.
- 26 U.S.C. 1016, "Adjustments to basis" (Cornell LII) - the statutory list of basis increases and decreases. 26 USC 1016: Adjustments to Basis. Accessed October 19, 2026.
- 26 U.S.C. 1014, "Basis of property acquired from a decedent" (Cornell LII) - stepped-up basis to fair market value at death. 26 USC 1014: Basis of Inherited Property. Accessed October 19, 2026.
- LegalClarity, "IRS List of Capital Improvements: What Qualifies" - the BAR test (betterment, adaptation, restoration) and examples of improvements versus repairs. LegalClarity: IRS List of Capital Improvements. Accessed October 19, 2026.