Cost Basis
The original value of an asset for tax purposes, used to calculate gain or loss when you sell.
What does cost basis mean?
Cost basis is usually what you paid, plus certain adjustments. Your taxable gain is the sale price minus the basis. Tracking it accurately is essential to avoid overpaying capital gains tax.
Put it to use
Like Kind Exchange Calculator This calculator is designed to calculate and the recognized loss, gain and the basis for a Like Kind Exchange. Company Stock Distribution Analysis Calculator If you own company stock in a retirement plan you may be able to take advantage of using the long term capital gains tax rate rather than your ordinary income tax rate on this investment.
Related terms
Cost Basis — frequently asked
How do I calculate cost basis?
Cost basis is what you paid for an asset plus commissions and reinvested dividends. When you sell, your taxable gain is the sale price minus this basis, so tracking it accurately keeps you from overpaying tax.
Why does cost basis matter at tax time?
Because you are taxed on the gain, not the sale price. A higher, well-documented basis means a smaller taxable gain. Reinvested dividends and stock splits adjust basis, and inherited assets often get a stepped-up basis.