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StockCram is not a broker-dealer, investment adviser, or financial institution. All content is for educational and informational purposes only and should not be construed as personalized investment advice. Consult a qualified financial professional before making investment decisions. Past performance does not guarantee future results.Simple Definition
What you originally paid for an investment - used to calculate your gain or loss when you sell.
Why It Matters
Your cost basis determines how much tax you owe when you sell. Bought at $50, sold at $100? Your gain is $50. But cost basis can get complicated: reinvested dividends, stock splits, and wash sales all adjust it. Keeping good records matters - if you can't prove your cost basis, the IRS assumes it's $0 (maximum tax).
Key Points
- Includes purchase price plus commissions and fees
- Reinvested dividends increase your cost basis (you already paid tax on them)
- Stock splits don't change total basis, just basis per share
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Common Questions
What you originally paid for an investment - used to calculate your gain or loss when you sell. Your cost basis determines how much tax you owe when you sell. Bought at $50, sold at $100? Your gain is $50.
Your cost basis determines how much tax you owe when you sell. Bought at $50, sold at $100? Your gain is $50. But cost basis can get complicated: reinvested dividends, stock splits, and wash sales all adjust it. Keeping good records matters - if you can't prove your cost basis, the IRS assumes it's $0 (maximum tax).
Includes purchase price plus commissions and fees
Reinvested dividends increase your cost basis (you already paid tax on them)
Stock splits don't change total basis, just basis per share