Adjusted Basis

Adjusted basis is a tax concept that determines the value of an asset for calculating capital gains or losses when you sell it. It starts with the original purchase price (cost basis) and is adjusted for factors like improvements made to the asset, depreciation, or additional costs incurred. For example, if you buy a house and later renovate it, the renovation costs increase your adjusted basis. This adjusted value is important because it affects how much profit you report to the IRS after selling the asset, ultimately influencing the taxes you owe on that profit.