Adjusted Basis
What you have invested in a property for tax purposes: purchase price, plus improvements, minus depreciation.
Definition
Adjusted basis is your starting cost in a property adjusted over time — increased by capital improvements and decreased by depreciation you’ve claimed. Your taxable gain on a sale is roughly the sale price minus selling costs minus adjusted basis. In a 1031, your basis "carries over" into the replacement property (a carryover basis), which is how the deferred gain is preserved for later.
Why it matters
A low adjusted basis — common after years of depreciation — means a large built-in gain, which is exactly when deferring tax through a 1031 is most valuable. Estimate your gain with the capital gains calculator.
Related terms
General education — not tax or legal advice. This explains how §1031 exchanges work in general terms and uses simplified assumptions. Rules and tax rates change and your situation is specific. Talk to a qualified CPA or tax attorney before you rely on any of it. See our full terms & legal notice.