Internal Revenue Service United States Department of the Treasury
Level Basic Advanced Military International

Income — Capital Gain or Loss

Gain on Sale of Main Home

Adjusted Basis

The adjusted basis is the taxpayer's basis in a home increased or decreased by certain amounts. Increases include additions or improvements to the home such as building a recreation room or adding a bathroom. In order to be considered an increase, an addition or improvement must have a useful life of more than one year. Repairs that maintain the home in good condition are not considered improvements and should not be added to the basis of the property. Decreases to basis include deductible casualty losses, gains a taxpayer postponed from the sale of a previous home before May 7, 1997, or certain credits. Decreases can also include depreciation during the time the home was used for business purposes or as rental property. If any of these decreases apply, refer the taxpayer to a professional tax preparer. For a list of possible increases and decreases to basis, see Publication 17 or Publication 523.

Click here to view Worksheet 1 (from Publication 523), which can be used to figure the adjusted basis of a home.

Basis + Increases - Decreases = Adjusted basis

Worksheet 1 from Publication 523

Worksheet 1 from Publication 523