Adjusted basis is the proportionate value of an asset or security that reflects any deductions taken on, or capital improvements to the asset or security. It is the net cost of an asset after adjusting improvement costs, depreciation, and damages that reduce the original value of the asset. Adjusted basis is used to compute the gain or loss on the sale of an asset or a security. Generally the adjustment basis will be higher than the original price. Adjustment basis amount will lower the tax for capital gains.