Basis Adjustment

Basis adjustment refers to changes in the value of an asset for tax purposes. When you buy an asset, its basis is usually its purchase price. Over time, this basis can be adjusted due to various factors, such as improvements made to the asset or depreciation taken if it’s used for business. Basis adjustments ensure that when you sell the asset, you accurately calculate your profit or loss, which affects your taxes. Understanding basis adjustment helps individuals and businesses manage their financial records and tax liabilities more effectively.