What is the difference between Permanent Improvements and Cost of Home Additions?

[Vanessa · Accepted solution]

A permanent improvement would be something like a new roof, new plumbing system, or something similar.  

A home addition would be an addition of a sunroom or adding a second story on a ranch home or adding a garage to your home. 

[coolkiwilivin]

I'm working on the sale of our former home for tax year 2020. We bought it in 2015 and TT is asking me all sorts of questions about the purchase and subsequent work over the years. We replaced the AC two years into the old  place. Would that count toward the Permanent Improvements or is that considered something else?

[ToddL99]

Add the cost of the new AC unit to the adjusted cost basis of your home to calculate your gain on the sale of the house.

Gain = Gross Proceeds from sale MINUS Selling Costs MINUS Adjusted Cost Basis of the property.