Take the purchase price of your property and add the cost of any improvements, "Realty Times" advises. If you bought a rental home for $300,000, for instance, that would be the basis for calculating your gains. If you later spent $30,000 on capital improvements -- a new roof and a kitchen remodel, for instance -- then your basis goes up to $330,000. This applies only to substantial improvements that add to the home's value, not to repairs. Fixing a leaky shower isn't a capital improvement, but replacing it with a newer, better shower would be. If you've been billed with a special assessment for neighborhood improvements -- $500 toward a new sidewalk, for instance -- you
can count those too.
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