Cost basis refers to the cost of the property adjusted for improvement and can be adjusted up or down for other reason. The IRS has various methods of calculating and tracking cost basis. Read here for more information to determine your cost basis.
Cost Basis Determines Taxes On Home Sale
When someone gives you a home what cost basis do you use when you sell it? Cost basis for taxes may include the original market value of the home as well as home improvements. After you've figured out the correct cost basis you can find out how much you'll owe in capital gains taxes. For more information on capital gains taxes and home sales visit the IRS Web site.
Calculating Profits On Home Sale
The cost basis of a property is calculated by adding the costs of purchasing the home to the costs of sale plus the costs of any capital improvements. Then, subtract the cost basis from the sales price. If your sales prices minus the cost basis doesn't equal a profit, you won't owe capital gains.
Estate Planning Helps With Real Estate Decisions
When your family owns several real estate investments, it's important to do thorough estate planning so that the wishes of those who own the properties are met. How can you balance a property that needs repairs with ensuring an elderly relative's medical costs are still met? An estate planner can help decipher the tax laws and help make good decisions for the property owner and the children who stand to inherit the home.