For example, if you replace a water heater more than once, you may only add the cost of the latest expenditure to basis. You also have to distinguish between an improvement and a repair. A repair merely keeps your home in an ordinary and efficient operating condition. It doesn't add to the value of your home, prolong its life or adapt it to a new use. You can't add the repair cost to your home's basis.
Careful timing can transform a repair into a home improvement.
Repairs completed as part of an extensive remodeling or restoration of your home are considered improvements, which means they can be added to your basis. Also, the distinction between an improvement and a repair isn't always clear. For example, painting either a room or your entire house for the first time is an improvement, meaning the cost can be added to basis. A later repainting of the room or entire house is a repair, and this cost doesn't increase your basis. Other adjustments to basis Items aside from improvements can increase or decrease your home's basis.