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Over the years that you own your home, your initial tax basis may need to be adjusted to reflect several kinds of events.
The most common reason for an addition to your basis is that you made a permanent improvement, such as a room addition, kitchen remodeling, installation of air conditioning or heating, new sidewalks or landscaping, etc. "Improvements" are generally defined as things that add to the value of the home, prolong its useful life, or adapt it to new uses. In contrast, "repairs" are things that keep your home in good working condition and maintain, but do not add to, its value. However, if jobs that would normally be considered repairs are done as part of a larger improvement project, all of the expenses can be treated as an improvement and added to your basis.
As you complete and pay for improvements, you should retain receipts and canceled checks for the payments you make.
Besides additions or improvements, you may need to record an increase in your home's tax basis if you pay a special assessment to your taxing body for a local improvement such as a sidewalk, paving an alley, etc. You should also increase your basis by the amounts you spend to restore damage to your home caused by a casualty, vandalism, etc.
Decreases to your basis will need to be made for the following amounts: