Pro RE Calculator: The Adjusted Basis Tax Calculation

adjusted basis calculation

Adjusted basis represents the net cost of (in our case) a rental income property adjusted for certain federal income tax related items; in other words, it refers to the increase or decrease in the property’s value due to depreciation and or capital enhancements.

It is a crucial component when calculating capital gains and losses for income tax purposes on an outright sale of a rental property since the adjusted basis is higher than the original price and will lower capital gains taxes.

In this article we’ll look at this income tax cost basis and show you how it’s computed on a rental income property sale.

Adjusted Basis

Represents the beginning basis of the property (depreciable basis plus land value) plus value of capitalized items less accumulated depreciation taken under depreciation guidelines during the holding period.

Capitalized items are those costs incurred over the holding period that extended the life of the investment and therefore were subject to depreciation.


Purchase price
+ Costs of acquisition
= Original basis
+ Capital additions
– Depreciation taken
= Adjusted Basis


Let’s say that you purchased a 25-unit apartment complex several years ago for $1,125,000 and incurred $27,000 in acquisition costs. Since then you have made $50,000 in capital improvements to the property and have taken $95,475 in accumulated depreciation. You want to know what your current adjusted basis is in order to plug it in for your taxable gain computation.

+ 27,000
= 1,152,000
+ 50,000
– 95,475
= 1,106,525


Let me show you how easily you can determine your adjusted basis using iCalculator (click image to enlarge).

adjusted basis calculation

Source: iCalculator by ProAPOD

So You Know

iCalculator makes dozens of real estate calculations with the formulas. You can try it risk-free and save 50% (you pay just $24.95). Click here to learn more and get the discount.

James Kobzeff

James Kobzeff has over thirty years experience as a realtor and investment real estate specialist. He is the developer of ProAPOD real estate investment software and freely shares his real estate investing articles.