1. What is Cost Basis?

Cost basis represents the total original investment in an asset for tax purposes. For stocks, it includes the purchase price plus any associated fees or commissions paid to acquire the investment.

2. How Does the Calculator Work?

The calculator uses the cost basis formula:

Where:

• Purchase Price — The price paid per share or total investment amount
• Fees — Any commissions, transaction fees, or acquisition costs

Explanation: The formula calculates the total amount invested, which is essential for determining capital gains or losses when the investment is sold.

3. Importance of Cost Basis Calculation

Details: Accurate cost basis calculation is crucial for tax reporting, determining capital gains or losses, and making informed investment decisions. It affects your tax liability when you sell investments.

4. Using the Calculator

Tips: Enter the purchase price and any associated fees in dollars. Both values must be non-negative numbers. The calculator will sum these values to determine your total cost basis.

5. Frequently Asked Questions (FAQ)

Q1: What types of fees should be included?
A: Include all acquisition costs such as brokerage commissions, transaction fees, and any other costs directly associated with purchasing the investment.

Q2: How does cost basis affect taxes?
A: Cost basis is subtracted from the sale price to determine capital gains (or losses), which are subject to taxation.

Q3: Are reinvested dividends included in cost basis?
A: Yes, reinvested dividends increase your cost basis as they represent additional investment in the security.

Q4: What if I purchased shares at different times/prices?
A: For multiple purchases, you need to calculate the cost basis for each lot separately, or use an average cost method if applicable.

Q5: How do stock splits affect cost basis?
A: Stock splits adjust your cost basis per share. Your total investment remains the same, but the per-share cost basis decreases proportionally.