It’s computed from your original purchase.
The adjusted cost basis of your home is the original price you paid, plus the cost of any capital improvements that you've made since purchase. Refinancing isn’t part of your calculation.
A capital improvement is any work done that adds to the value of your home, increases its useful life, or adapts it to new uses. Common examples include room additions, new bathrooms, decks, fencing, landscaping, wiring upgrades, walkways, driveway, kitchen upgrades, plumbing upgrades, new roofs.
The adjusted basis of your home is the original purchase price, plus certain settlement fees paid at time of purchase, and the cost of any improvements made to the home prior to your sale.
For a detailed explanation of items that can be added to your original basis to arrive at your adjusted basis, please see IRS Publication 523, Selling Your Home.
