Cost Basis Tracker
Track every improvement; pay less tax at sale.
Filing status
NIIT applies?
MAGI > $200k single / $250k MFJ.
Tax saved by tracking improvements
$0
Your estimated gain ($361,000) is within the §121 exclusion — no tax owed regardless of improvements at this sale price. But keep tracking — if the sale price grows or you convert to a rental, the basis matters.
Original cost basis
$405,000
$400,000 + $5,000 closing
Capital improvements tracked
$71,000
3 items
Adjusted basis
$476,000
original + improvements
Estimated gain at sale
$361,000
$837,000 net − $476,000 basis
§121 exclusion ($500k MFJ)
$361,000
fully excluded
Estimated tax owed
$0
within exclusion
What counts (and what doesn’t)
The BAR test (per Reg §1.263(a)-3): a capital improvement is one that Betters the property (more valuable), Adapts it for new use, or Restores a major component.
Counts as improvement: kitchen reno, bathroom reno, room addition, new roof, new HVAC, new water heater, replacing major appliances/systems, finished basement, deck/patio addition, pool, solar (post-credit cost basis), permanent landscaping/hardscape, foundation work, electrical/plumbing system replacement.
Does NOT count (repair / maintenance): patching a roof (vs. replacing), painting interior or exterior, fixing a leaky faucet, replacing a broken appliance with similar, cleaning, lawn care, pest control, ongoing service contracts.
The grey area: a series of repairs that effectively replaces a major component (roof patched repeatedly until equivalent to replacement) can become an improvement. Get a CPA opinion on cumulative cases.
Document everything: save receipts, invoices, permits, before/after photos, cancelled checks. The IRS audit window is 3 years from when you file the return reporting the sale (6 years if you under-report gross income by >25%). Keep records for at least that long after the sale year — longer is better.
Ever rented? Subtract depreciation. This calc assumes a primary residence. If the home was a rental at any point, your basis is reduced by depreciation taken (or "allowable" — even if you forgot to claim it). That depreciation gets recaptured at sale up to 25% federal under §1250, on top of any §121 exclusion. Use the rental tax-shelter calc for that scenario.
See full Cost Basis Tracking guide for examples and edge cases. Tax law is fact-specific — consult a CPA for high-improvement homes ($150k+) or rental conversions.