What Adds to Your Home's Cost Basis? A Room-by-Room List

TL;DR: Your home's cost basis starts with the purchase price plus closing costs, and then goes up every time you pay for a capital improvement — a new roof, a kitchen remodel, an added bathroom. Routine repairs and maintenance never touch basis. Under the IRS's de minimis safe harbor, items costing $2,500 or less per invoice (or $5,000 with an applicable financial statement) can often be expensed outright instead of added to basis, if you make the election.

_Last reviewed: August 2026 · 8 min read_

Most homeowners find out what "cost basis" means the year they sell, when a tax preparer asks for receipts they threw away a decade ago. The rule is simpler than it looks once you walk it room by room, and it's worth doing now, while the paperwork still exists.

Okoniq Property Hub keeps a running log of improvements by room and date, so you're not reconstructing a decade of receipts the year you sell.

What exactly counts as cost basis?

Cost basis is what you paid for the house, adjusted upward over time. It starts with the purchase price, plus certain closing costs like title fees, recording fees, and legal fees tied to the purchase (not the mortgage). From there, it goes up every time you pay for a capital improvement — something that adds value, extends the property's life, or adapts it to a new use.

Basis does not move for routine repairs, cosmetic touch-ups, or anything that just keeps the house running the way it already was. This is the same line the IRS draws for rental property between capitalizing and expensing — see the 4-question decision tree for landlords if you also rent out part of the property or a separate unit. If you inherited the house instead of buying it, your starting basis is calculated differently — that's covered in how to calculate cost basis on an inherited house.

Which room-by-room improvements actually add to basis?

Almost anything that changes the structure, systems, or layout of a room adds to basis — here's what that looks like in practice.

Kitchen: New cabinets, countertops, a rebuilt layout, new plumbing lines, or a full appliance package installed as part of a remodel. A single replacement faucet does not count; gutting and rebuilding the kitchen does.

Bathroom: Adding a bathroom, converting a half-bath to a full bath, replacing a tub with a walk-in shower system, or re-tiling as part of a larger renovation.

Roof and exterior: A full roof replacement, new siding, new windows throughout the house, or a new driveway. Patching a leak or repainting the trim does not count.

Systems: A new HVAC system, a new water heater, rewiring the electrical panel, or a new septic system. These extend the life of the house and count as improvements even though they're not visible in any single room.

Additions and structural work: A finished basement, a new deck, an added bedroom, or a converted garage. These are the clearest cases — you're adding square footage or usable space, which is exactly what basis is meant to capture.

The pattern across every room: if the work restores the property to its prior condition, it's a repair. If it betters, adapts, or restores it to a materially different or improved state, it's a capital improvement. The IRS calls this the BAR test — see what's the BAR test? for the full breakdown, which applies to rentals but uses the same logic homeowners face.

What doesn't count — and where the line actually sits?

Repairs, maintenance, and small fixes don't add to basis, even when they're expensive. A furnace tune-up, a patched roof leak, repainting a room, or replacing a broken window pane are maintenance — they keep the house at its existing condition rather than improving it.

| Adds to basis (capital improvement) | Does not add to basis (repair/maintenance) | |---|---| | Full kitchen remodel | Replacing one cabinet door | | New roof | Patching a leak | | Added bathroom | Re-caulking an existing tub | | New HVAC system | Furnace filter change or tune-up | | Finished basement | Repainting a room |

Landlords who run a mix of both on the same property often use the de minimis safe harbor to simplify small-dollar decisions. Under current IRS rules, you can elect to expense items costing $2,500 or less per invoice or item (or $5,000 if you have an applicable financial statement), rather than tracking each one as a separate improvement. Details on making that election are in de minimis safe harbor $2,500 — how landlords use it. This applies to a rental unit's books, not directly to your personal residence's basis, but the same $2,500/$5,000 line is a useful gut check for "is this small enough to just be maintenance."

How do you track and prove these additions to the IRS?

You prove basis with receipts, invoices, and contracts tied to a date and a dollar amount — not memory. Keep the closing statement from your purchase, every contractor invoice for improvement work, and permits pulled for structural changes. Photos before and after help but don't replace paper.

This record-keeping matters most at sale, when you calculate gain by subtracting adjusted basis from sale price. It also matters if you ever convert the home to a rental — basis carries over, and the IRS will want the same documentation to support depreciation going forward. That conversion has its own set of rules, covered in converting primary home to rental — tax effects & basis rules.

If the home was ever rented out and you claimed depreciation, the calculation at sale gets a second layer — some of your gain may be taxed as depreciation recapture rather than capital gain. That's a separate topic from basis but closely related; see depreciation recapture — what happens when you sell if any part of the property was ever a rental.

Does a major renovation ever qualify for bonus depreciation instead?

Bonus depreciation applies to rental and business property, not a personal residence — but it's worth knowing the current rule if any part of your home is rented out. Under the One Big Beautiful Bill (P.L. 119-21), qualified property acquired after January 19, 2025 gets 100% additional first-year depreciation, made permanent — the older 40%/20% phase-down no longer applies to property acquired after that date. Confirm your acquisition date and placed-in-service date against IRS.gov, since binding-contract dates can affect which rule applies.

FAQ

Does a new furnace add to my home's cost basis?

Replacing a broken furnace with a similar one is generally a repair and does not add to basis. Installing a new, higher-capacity system as part of an upgrade or addition is a capital improvement and does add to basis — the distinction is whether you're restoring the same function or improving it.

Do closing costs count toward cost basis?

Yes, certain closing costs from the original purchase — title insurance, recording fees, and legal fees tied to acquiring the property — are added to basis. Costs tied to financing the mortgage generally are not.

What if I don't have receipts for old improvements?

Bank statements, contractor invoices, permits, and even canceled checks can substitute for lost receipts. Rebuild what you can and keep everything going forward — the IRS wants documentation, not a specific format.

Does landscaping add to cost basis?

Major, permanent landscaping like a retaining wall, new drainage system, or paved patio adds to basis. Routine lawn care, mulching, or seasonal planting does not.

How does cost basis affect capital gains when I sell?

Your taxable gain is the sale price minus your adjusted basis, so every dollar of documented improvement lowers your gain dollar for dollar. If you've owned the house for decades, this adds up — see do I owe capital gains after 30 years in my house? for how long ownership interacts with basis and gain.

<div class="glass rounded-2xl p-5 mt-7 max-w-4xl border border-red-400/30 bg-red-500/5"> <div class="flex items-start gap-3"> <span class="text-2xl flex-shrink-0">⚠️</span> <div class="flex-1 min-w-0"> <p class="text-red-200 text-sm font-bold">Not tax advice</p> <p class="text-slate-300 text-xs mt-1 leading-relaxed"> This post assumes a general owner-occupied or rental-converted home and uses figures verified against IRS.gov as of July 2026. It does not account for your specific state law, entity structure, prior depreciation claimed, or any legislation passed after that date. Tax rules change and depend on your specific situation. Talk to a licensed CPA before acting on anything here, and confirm current figures on IRS.gov. </p> </div> </div> </div>