Cost Basis Calculator
Calculate your rental property's adjusted cost basis, depreciation, and potential tax impact on sale.
Capital Improvements
$
$
Adjusted Cost Basis
$259,184
After 8 years of depreciation
Accumulated Depreciation
$69,816
Potential Gain
$160,816
Depreciation to Recapture
$69,816
Step-by-Step Breakdown
1. Original Purchase Price$300,000
2. + Closing Costs$9,000
3. = Initial Basis$309,000
+ New Roof$12,000
+ Kitchen Remodel$8,000
4. + Capital Improvements$20,000
5. = Adjusted Basis Before Depreciation$329,000
6. - Accumulated Depreciation (8 yrs x $8,727/yr)-$69,816
7. = ADJUSTED COST BASIS$259,184
If You Sell at $420,000
Potential Gain$160,816
Depreciation Recapture (taxed at 25%)$69,816
Capital Gain (taxed at 15-20%)$91,000
Improvements increase your basis and reduce taxable gain. Keep receipts for all improvements over $2,500. Learn about safe harbor elections
Depreciation is mandatory -- the IRS treats it as "allowed or allowable" even if you didn't claim it. Your basis is reduced regardless.
Track basis, improvements, and depreciation for all your properties
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Frequently asked questions
What is the difference between original basis and adjusted basis?
Your original (or initial) basis is what you paid for the property plus acquisition costs like title, escrow, and legal fees. Adjusted basis starts from there and changes over time — it goes up for capital improvements and down for depreciation you take. Adjusted basis is the number that actually matters when you sell.
What increases my cost basis?
Capital improvements that add value or extend the property’s life increase your basis — a new roof, an addition, a kitchen remodel, new HVAC, and similar long-lived work. Many closing costs at purchase also add to basis. Routine repairs and maintenance do not; they are deducted in the year you pay them.
What decreases my cost basis?
Depreciation reduces your basis every year you own a rental. The IRS treats depreciation as “allowed or allowable,” so your basis is reduced for the depreciation you could have claimed even if you never did. This is why accumulated depreciation often comes back as recapture when you sell.
Why does cost basis matter when I sell?
Your taxable gain is roughly the sale price minus selling costs minus your adjusted basis. A higher adjusted basis means a smaller gain and less tax — so tracking improvements and acquisition costs directly affects your bill. Depreciation taken is recaptured (taxed up to 25%) and the rest is capital gain.
Is this a substitute for tax advice?
No. This is an estimate to help you plan, not tax advice. Real returns depend on your specific facts, elections, and current law — keep records and receipts for every improvement and consult a CPA before filing or selling.