What Is Adjusted Basis in a Home?
By JC Pacific Corp Published 2026-09-01 Last professionally reviewed: September 2026
Adjusted basis is generally the property's starting tax basis after increases and decreases required by tax rules. It is central to determining gain or loss when the property is sold.
What may establish starting basis?
For a purchased home, basis often begins with cost and certain acquisition expenses. Different rules may apply to inherited, gifted, exchanged, converted, or jointly owned property.
What can increase basis?
Depending on tax rules, possible increases may include:
- Qualifying additions
- Major renovations
- Certain permanent improvements
- Special assessments for local improvements
- Restoration after a casualty
- Certain acquisition costs
What can decrease basis?
Possible decreases may include:
- Depreciation allowed or allowable
- Insurance reimbursements
- Casualty deductions
- Residential energy credits or subsidies
- Easements or payments affecting basis
- Prior tax adjustments
Frequently Asked Questions
Is basis the property's current market value?
No.
Is basis the mortgage balance?
No.
Can I estimate basis from the county's assessed value?
Property-tax assessed value and federal income-tax basis are different concepts.
Educational information
The tax treatment of each adjustment depends on current rules and documentation.
Have a tax professional reconstruct adjusted basis before calculating expected taxable gain.
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A note on legal advice: These guides provide general, educational information about California real estate practice. They are not legal advice and do not create an attorney-client relationship. Mortgage information is general education, not individualized lending, tax or legal guidance. For advice about your specific offer, contract, closing or financing, consult a qualified California real estate attorney and a qualified mortgage professional.
A note on these tax guides: The California home-sale tax articles provide general educational information and have been reviewed by a qualified California tax professional. They are not tax, legal, accounting, financial, or insurance advice, and JC Pacific Corp and its real estate professionals are not tax advisers. Sale price, equity, net proceeds, taxable gain, withholding, and final tax are different numbers, and withholding is a collection mechanism, not a determination of final tax liability. Verify current IRS and California Franchise Tax Board forms and rules with a qualified tax professional before making decisions.