Question

Larry is preparing to sell a property and needs to calculate his basis. Which of the following items would increase his original basis?

Answer 1

Items that increase (i.e., are added to) your original basis in a property

- Purchase price — the starting point for basis.
- Capital improvements that add value or extend useful life — e.g., room additions, new roof, new HVAC, kitchen remodel, swimming pool. (Routine repairs and maintenance do NOT increase basis.)
- Settlement/closing costs paid by the buyer — e.g., title insurance, recording fees, transfer taxes, survey fees and attorney fees related to acquiring the property.
- Legal fees and other costs of acquiring the property (not ordinary operating legal fees).
- Special assessments for permanent local improvements (curbs, sidewalks, sewer lines) that increase the property’s value.
- Certain acquisition costs related to financing — e.g., some mortgage-related fees or points that are not otherwise deductible may be capitalized into basis.

Things that do NOT increase basis (for contrast): mortgage interest, property taxes, insurance, HOA dues, ordinary repairs and maintenance. Depreciation and casualty/theft losses reduce your adjusted basis after the original basis is established.

If you want, tell me the specific items you have and I’ll say which ones should be added to Larry’s basis and compute the basis.