Get your taxes done using TurboTax

First, remember you only need to enter information if you received a 1009-S.  Otherwise, delete any input. The IRS doesn't want or need this information if there is no 1099-S and the gain is below the reporting threshold.

No, the IRS does not consider your cost income.  Yes, you can enter the cost of your home in the interview screen "Tell Us About the Purchase of Your Home." The cost basis includes both the original cost and home improvements.