What is the "basis" of an asset?

The "basis"of an asset is what a person has paid for an asset together with money invested in an asset after purchase. This determines gain/loss for income tax purposes.

Example: You purchased your house for $100,000, but have since had to put on a new roof for $3,000, you added on a garage for $10,000, and updated the windows for $4,000. Your new basis in your house is now $117,000 ($100,000 + $3,000 + $10,000 + $4,000).