The profit you make when you sell your house
You can calculate your capital gain by subtracting the adjusted cost basis from your home's selling price. The adjusted cost basis is your home's purchase price plus any major renovations you have made on your property, minus any losses like the cost of repairing flood damage. Based on your capital gain, the federal government figures out how much tax you owe.
Example: How do you calculate your capital gain?
Step 1
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Purchase price | $200,000 | |
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Swimming pool installation | + | 10,000 | |
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Flood damage repair | - | 5,000 | |
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Adjusted cost basis | = | $205,000 | |
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Step 2
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Home selling price | $250,000 | |
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Adjusted cost basis | - | 205,000 | |
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Capital gain | = | $45,000 | |
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