Your adjusted basis is essentially your tax foundation for a property. It starts with what you paid for the property, then factors in the cost of capital improvements—things like new roofs, HVAC systems, or major renovations. From there, it subtracts any depreciation you’ve claimed over the years. This number is critical when you sell, because it determines how much of the profit the IRS considers taxable capital gains. Investors doing 1031 exchanges rely on adjusted basis calculations to defer taxes properly. If you don’t know your basis, you can’t plan your exit strategy well. It’s one of the first things your CPA or Qualified Intermediary will ask about.
