Free download
Rental property cost basis worksheet
A free worksheet that turns your settlement statement into the three basis numbers that matter: starting basis, the building's depreciable basis, and adjusted basis at sale. With a running capital-improvements log on its own tab. No email, no signup.
- Maps the settlement statement: what adds to basis, what stays out
- Capital-improvements log on its own tab, totals feed the basis math
- Depreciable basis and adjusted-basis-at-sale as live formulas
Educational template, not tax advice. The capitalization rules are IRS Pub 551 (Basis of Assets) and Pub 527 (Residential Rental Property); confirm your numbers with your CPA.
Cost basis is three different numbers
Most basis mistakes come from treating it as one figure. It is three, and each answers a different question. Starting basis is the purchase price plus the closing costs that capitalize; it is fixed on the day you buy. Depreciable basis is starting basis minus land, and it is what the 27.5-year clock runs on. Adjusted basis is the living number: starting basis, plus every capital improvement since, minus every dollar of depreciation claimed, and it is what your gain is measured against when you sell. The worksheet keeps all three straight and shows how each one flows into the next.
What the settlement statement adds to basis
| Settlement line | Where it goes |
|---|---|
| Owner's title insurance, title fees | Adds to basis |
| Legal, recording, transfer taxes, survey | Adds to basis |
| Seller's back taxes or charges you paid | Adds to basis |
| Loan points, origination, appraisal, credit report | Not basis: amortized over the loan |
| Prorated property taxes, hazard insurance | Not basis: year-one Schedule E expenses |
| Escrow and impound deposits | Not basis: still your money |
The left-out lines are not lost deductions, they are just claimed elsewhere. The worksheet lists them under the basis block so nothing on the statement goes unaccounted for.
Improvements raise basis; repairs never do
The second tab is a one-row-per-project improvements log, because this is the record the IRS actually expects you to produce years later. A new roof, a kitchen remodel, or a fence raises your basis and starts its own depreciation clock. Fixing what broke, at like-for-like quality, is a repair: it goes on Schedule E line 14 the year you pay it and never touches basis. The log's guidance column keeps the two apart, and purchases of $2,500 or less can usually skip both routes with the de minimis safe harbor.
From basis to the depreciation schedule
Carve the land out of starting basis (the assessor's land share is the standard shortcut) and you have row one of your depreciation schedule; each improvement from the log becomes its own row with its own start date. Our free depreciation schedule template is built for exactly that hand-off, the depreciation calculator prints the year-by-year numbers, and the step-by-step guide walks the math. Converting a former home instead of buying? Your depreciable basis is the lesser of adjusted basis or fair market value on the conversion date; the conversion guide covers that rule.
When the spreadsheet stops scaling
Basis is exactly the record our bookkeeping product keeps without being asked: it reads purchase and improvement costs from your books (or extracts basis and accumulated depreciation straight from a filed return's Form 4562), carries adjusted basis forward every year, and has the recapture number ready the day you sell. This worksheet is the same structure, kept by hand.
Frequently asked questions
How do I determine the cost basis of a rental property for depreciation?
Start with the purchase price, add the closing costs that capitalize (owner's title insurance, legal and recording fees, transfer taxes, survey, any seller charges you paid), then subtract the land value. What remains is the building's depreciable basis, the number the 27.5-year clock runs on. On a $300,000 purchase with $2,050 of capitalized closing costs and $60,000 of land, that is $242,050. The worksheet computes it from the settlement-statement lines.
Which closing costs add to the basis of a rental property?
The costs of acquiring the property capitalize: owner's title insurance and title fees, legal and recording fees, transfer taxes, surveys, and anything the seller owed that you agreed to pay. The costs of the loan do not: points, origination, appraisal, and credit-report fees are amortized over the life of the loan instead. Prorated property taxes and insurance are just year-one operating expenses. IRS Pub 551 carries the full lists.
Do capital improvements increase cost basis?
Yes, every one of them, which is why the worksheet has a running improvements log tab. A new roof, remodel, or fence raises adjusted basis and also starts its own depreciation schedule. Repairs never touch basis: fixing what broke is a Schedule E line 14 deduction the year you pay it. The distinction is the BAR test (betterment, adaptation, restoration = improvement).
How do I figure out the land value?
The standard shortcut is the county assessor's split: if the assessment shows 20% land, apply 20% to your starting basis. An appraisal that states a land value also works, and is stronger support for an unusual ratio. What you cannot do is skip the carve-out; land never depreciates, and depreciating it invites the IRS to recompute every year you filed.
What is my basis if I convert my home to a rental?
The lesser of your adjusted basis or the fair market value on the day it becomes a rental, whichever is lower. A home bought for $400,000 and worth $350,000 at conversion depreciates from $350,000 (minus land). Appreciation works the other way: bought for $200,000, worth $500,000, and you still depreciate from the $200,000 side. Your original closing costs and improvements while you lived there count toward that adjusted basis.
Does refinancing change my cost basis?
No. Loan balances never touch basis: not the original mortgage, not a refinance, not a cash-out. Basis tracks what the property cost, not how it is financed. The only refinance numbers that matter for taxes are the new loan's points and costs, amortized over the loan, and any leftover unamortized costs from the old loan, deducted when it pays off.