The basis file holds every number that determines depreciation now and gain on sale later: the purchase price, the closing costs that are added to basis, the allocation between land and building, each improvement with its date and cost, and the depreciation taken each year. IRS Publication 527 tells landlords to keep the cost of improvements because they “will need to know the cost of improvements when you sell or depreciate your property,” and the IRS retention page says to keep property records “until the period of limitations expires for the year in which you dispose of the property” (IRS). A file started at closing takes an hour; one reconstructed at sale takes a season.
Contents
| Section | Documents | Use |
|---|---|---|
| Acquisition | Closing statement; deed; title policy; loan documents; appraisal | Purchase price; capitalised closing costs |
| Land allocation | Appraisal-district record at purchase or an appraisal; the ratio used and why | Building basis for depreciation |
| Placed in service | Listing date or first lease; readiness evidence | Start of depreciation |
| Improvements | Invoice, description, completion date, cost — one entry per improvement, with the repair/improvement decision noted | Separate depreciation schedules; adjusted basis |
| Casualty and insurance | Claims, proceeds, restoration costs | Basis adjustments |
| Depreciation taken | Each year’s return schedule | Adjusted basis; recapture on sale |
| Disposition | Sale contract; closing statement; costs of sale | Gain computation |
Keeping it
- Open the file at closing with the closing statement and the appraisal-district printout of that year.
- Add each improvement when paid — the work-order guide captures the description that decides its treatment.
- Each spring, add the depreciation schedule from the return.
- Never discard it; the retention period runs from the sale, not the purchase (IRS).
Texas facts that help
The appraisal district’s record separates land and improvement values every year and is a public, dated document — the twenty city guides on this site link each district. It is a reasonable starting point for the land allocation; the file should say that it was used and keep the printout.
Frequently asked questions
What is in a rental property basis file?
The purchase price and capitalised closing costs, the land allocation, the placed-in-service date, every improvement with its cost and date, casualty adjustments and the depreciation taken each year (IRS Publication 527).
How long is the basis file kept?
Until the period of limitations expires for the year in which the property is disposed of (IRS).
How is land value separated in Texas?
A reasonable method is the appraisal district’s land and improvement values for the purchase year, documented in the file; an appraisal is the alternative.
Sources
Rules change and the right answer can depend on the home, the city, the lease and the timing. These are the official pages this guide relies on; check them before signing, charging a fee, sending a notice or making a legal decision.
- IRS Publication 527 (2025) — Residential Rental Property ↗
- IRS — How long should I keep records? ↗
- IRS — Tangible property final regulations (de minimis, small taxpayer and routine maintenance safe harbors) ↗
- IRS — Tips on rental real estate income, deductions and recordkeeping ↗
General information for U.S. landlords, with a Texas focus. This guide is not legal, tax or accounting advice. Consult a qualified professional for your situation. Written by the rentalfreelease.com Editorial Team; last reviewed September 19, 2026.