Program Director

The net result is still the value of the property at the time of sale – the top number in our simple mathematical equation to determine the amount of “gain” in the property.

In contrast, cost basis is the bottom number that is subtracted from value to give us the answer to our gain question. Simply stated, cost basis is the original cost of the property, plus any improvements made by the owner. Improvements can be items such as:

Installing utilities on a building lot (electrical pole, well, septic system, etc)

New roof or deck

Remodeling the interior of the home

Numerous other improvements performed by the owner

When selling property, it is imperative to define the cost basis of the investment. Accurately define any improvements made on the property and compare it to the current value. The difference is the capital gain and subsequent amount that could be taxed by the government during the sale. By having developed an accurate cost basis, you will be better prepared to take advantage of the various capital gain tax planning options..
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