Tax basis definition

Basis is the cost of an asset. It is used for two primary purposes:

- It's the amount used to calculate depreciation deductions
- It's the amount used to determine gain or loss on the sale or other disposition of an asset.

Basis is reduced with depreciation deductions, and it can be increased with the cost of improvements, such as on real estate, for example.

Be sure to consult your tax professional for basis determination for your tax circumstances.