Capital Gains on Property in California

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If I buy a house for $500,000 and I put in $70k into upgrades, that means the house when everything is all said and done would be $570k. If later I decide to sell the house for $600,000 in 4 years, do I have to pay the capital gains tax on the difference of $100k ($500k-$600k)?? OR, since I paid in $70k cash (after tax dollars) would I pay capital gains on $30k? ($570k-$600k)??

I feel like if I pay taxes on $100k, that $70k I put into it after tax dollars cash then I would be getting double taxed. PLEASE EXPLAIN.... : )

The house is in California.
 
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bklynboy

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You pay tax on the difference between sales price and cost basis which in your case if 570K assuming these are improvements and not maintenance (i.e. painting).
 

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