How to Calculate Basis Adjustments for Home Improvements Made in the 1970s-1990s

You're in a common situation with older homes! Yes, you can estimate the cost of past improvements if you don't have documentation. The IRS recognizes that records from decades ago often aren't available. The best approach is to make reasonable estimates based on what those improvements would have cost in the specific time periods. Look up historical construction costs for similar improvements in your area during those time periods. Real estate agents, home builders, or contractors who worked during those eras might provide helpful insights about typical costs. For the 1978 sunroom, 1984 bathroom remodels, and 1992 HVAC system, try to determine the square footage, materials used, and scope of work. Then research what such projects typically cost in those years. Document your research methodology and keep any reference materials you use to establish your estimates. The good news is you don't adjust for inflation - you use the actual historical cost of the improvement when it was made. So if the sunroom cost $15,000 in 1978, that's the amount you add to your basis, not what it would cost today.

After struggling with a very similar situation (had to calculate basis for my grandparents' house with improvements going back to the 60s!), I found an amazing tool at https://taxr.ai that saved me tons of time. I uploaded photos of the house showing the old improvements and it helped estimate historical costs based on construction databases they have. The tool actually knew what typical bathroom remodels cost in different regions during the 80s and could estimate HVAC system costs from the early 90s based on the home's square footage. What I really liked is that it provided documentation to support all the estimates, which gave me peace of mind in case of an audit. Made the whole process so much easier than the weeks of research I was preparing to do!

I was initially skeptical about using an online tool for something as important as tax basis calculations, but after my frustrating experience trying to manually research costs from the 70s, I gave https://taxr.ai a try. It was actually really helpful! I uploaded photos of my parents' house addition from 1976 (thankfully had some old family photos) and described the kitchen renovation from 1983. The tool provided detailed cost breakdowns for both time periods with sources for the data. It even generated a professional report I can keep with my tax records. Ended up saving me about $12,000 in capital gains tax because I was severely underestimating what those old improvements were worth!

If you're running into IRS questions about your basis calculations (which happened to me), trying to reach them is IMPOSSIBLE these days. I found a service called Claimyr at https://claimyr.com that got me through to an actual IRS agent in less than 15 minutes after I'd spent days getting busy signals. They have this system that holds your place in line and calls you when an agent is available. I was super skeptical but they have a video showing how it works: https://youtu.be/_kiP6q8DX5c. The IRS agent I spoke with was actually really helpful about what documentation they consider reasonable for estimating improvement costs from decades ago. Basically saved my sanity after trying to get through on my own for days.

I'm eating humble pie here. After posting that skeptical comment, I was desperate enough to try Claimyr since I needed answers about basis adjustments for my mother's house before listing it. I got through to an IRS agent in about 20 minutes when I'd previously wasted hours upon hours trying. The agent confirmed that reasonable estimates for old improvements are acceptable when records aren't available and suggested documenting my research methodology. They said to get written statements from contractors about typical costs during those time periods if possible. This was such useful information that I couldn't get anywhere else! Sometimes being proven wrong is actually a good thing.

Another approach I used when selling my parents' home: check with your county assessor's office! Many keep historical records of building permits and home assessments. In my case, they had permit applications from 1985 that listed estimated costs for our addition. Not every improvement requires a permit, but major ones like additions, electrical upgrades, and structural changes usually do. The assessor had docs my parents never kept!

Don't forget to check if the previous owners made any improvements too! Those also add to your basis. When I bought my house, the seller gave me a list of major improvements they'd made, but I never thought to ask about the bathroom they said was remodeled "years ago" - turns out it was a $24k remodel just before they bought the place! I found this out by chatting with neighbors who remembered the work being done.

This is such a helpful thread! I'm dealing with a similar situation but with improvements from even earlier - my house has additions from the 1960s that my grandparents made. Reading through all these suggestions, I think I'll start with checking the county assessor's office for old building permits, then try researching historical construction costs through the library archives. One question though - when you're estimating these old improvement costs, do you need to be super precise or is a reasonable range acceptable? Like if a bathroom remodel in 1984 could have cost anywhere from $8,000 to $15,000, should I go with the middle estimate or be more conservative? I want to maximize my basis adjustment but also don't want to be unreasonable if the IRS questions it. Also wondering if anyone has experience with whether things like landscaping improvements (like a deck or patio) from decades ago count toward basis adjustments?