Cost Basis

Investing

Cost basis is what you paid for an investment, used to calculate gains or losses when you sell. For stocks, basis includes purchase price plus commissions. Reinvested dividends increase basis. Stock splits adjust basis per share but not total basis. Inherited assets get a 'step-up' basis to fair market value at death — a major estate planning benefit. Brokerages report basis to the IRS for covered securities (most purchases after 2011). For uncovered securities (older holdings), you're responsible for tracking it. Different cost basis methods (FIFO, LIFO, Specific Identification) produce different tax outcomes; consider with a CPA for large taxable holdings.