Cost basis information
Tips and tools to make cost basis work for you.
What cost basis is
In its broadest sense, cost basis refers to the price you paid for your shares. That figure is adjusted upward for reinvested dividends and capital gains and any commissions or transaction fees you paid.
What cost basis won't necessarily tell you is how much money you made on an investment. It's intended to help you calculate your capital gains and losses when it's time to file your taxes.
Why it's important to report cost basis accurately
The IRS requires you to report capital gains and losses on your annual tax return when you sell or redeem shares of stocks, bonds, mutual funds, exchange-traded funds (ETFs), and other investments.
Choosing the right method for calculating your cost basis will determine in part how much you'll pay in taxes for the current year, and how detailed your recordkeeping will need to be.
How we report cost basis
The IRS introduced regulatory changes related to cost basis in 2011 and will continue to phase in more changes through 2016. As a result, we're required to provide reporting for a wide variety of nonretirement accounts and investment types. In addition to sending the reports directly to investors, we must send them to the IRS as well.
A special note about bonds
Less complex bonds (usually those with fixed yield and maturity dates) and most options were covered by the regulations starting on January 1, 2014.
More complex bonds (usually those without fixed yield and maturity dates) and certain related options will be covered by the regulations starting on January 1, 2016.