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A tax and accounting term referring to the original acquisition cost of a property, with the following adjustments:
• Depreciation, which reduces the basis
• Capitalized closing costs, which increase the basis
• Capital improvements, such as a new roof, which increase the basis
The difference between the adjusted basis and the ultimate sale price of a property will be the taxable profit on the sale.The adjusted basis is an extremely important tax concept,and one which it is important to master in order to comfortably evaluate properties.