Tax Basis

Tax basis refers to the value used to determine gain or loss when an asset is sold or transferred. Essentially, it is the amount you invested in the asset—such as what you paid for it, plus any additional investments made, minus any depreciation taken. When you sell the asset, the difference between the selling price and the tax basis determines your taxable gain or loss. Understanding your tax basis helps you accurately report income to the tax authorities and ensures you pay the correct amount of taxes when selling or disposing of assets.