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Improvement Basis Calculator
Capital improvements (Betterment, Adaptation, Restoration — BAR test) add to building basis and depreciate over their 27.5/39 year life from in-service date. Repairs are deducted as expense in year incurred. This calculator combines original basis with improvements to compute the adjusted total basis and resulting annual depreciation.
Adjusted total basis
$325,000
Total improvements
$65,000
Annual depreciation
$11,818
How the math works
Capital improvements (BAR test: Betterment, Adaptation, Restoration) add to building basis and depreciate over their own 27.5/39 year life from in-service date. This calculator combines original basis with improvements to compute new annual depreciation.
Repairs (vs improvements) are deducted as expense in year incurred. The repair regulations §1.263(a)-3 provide specific tests — get CPA help on borderline items.
How to Use
- Enter original building basis.
- Enter cost of each improvement (roof, HVAC, kitchen, other betterments).
- Enter depreciation life (27.5 residential, 39 commercial).
- Read adjusted total basis and annual depreciation.
Frequently Asked Questions
BAR test for capitalization?
Betterment (improves condition), Adaptation (new use), Restoration (replaces major component or fixes pre-purchase deferred maintenance) — all capitalized. Routine repairs (paint, leaks, dripping faucets) are expensed.
Bonus depreciation?
Through 2026: 80%/60%/40%/20%/0% phase-down of bonus depreciation on improvements with 20-year-or-less recovery class. Cost segregation studies separate eligible items from 27.5/39-year property.
Improvements during ownership vs at purchase?
Same treatment — capitalize, allocate basis, depreciate from in-service date. At-purchase 'rehab' often easier to track via CPA-prepared depreciation schedule.
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