Covered & noncovered shares

For tax-reporting purposes, the difference between covered and noncovered shares is this: For covered shares, we're required to report cost basis to both you and the IRS. For noncovered shares, the cost basis reporting is sent only to you. You are responsible for reporting the sale of noncovered shares.

You remain responsible for reporting your cost basis information to the IRS every year on Form 1040, Schedule D, for all shares sold, whether they're covered or noncovered. You should use your own records in addition to the cost basis information we provide.

In addition, for covered shares, the information you report in column (e) of Form 8949 must match what we send to the IRS on Form 1099-B. We aren't required to make certain adjustments that are necessary for your tax return. For example, we don't adjust basis for wash sales when the purchase or sale is in another account or for taxes paid on gifts. Pay close attention to the IRS instructions for Schedule D and Form 8949.

For noncovered shares, Vanguard only has average cost information for mutual funds, so you're responsible for your recordkeeping if you used another method.

A special note about covered shares

To determine if an investment you hold is covered or noncovered, follow these steps:

1. Log in to your account.
2. From My dashboard, go to Portfolio.
3. Choose Cost basis.
4. Choose either Unrealized gains & losses or Realized gains & losses
5. Beneath the holding you'd like to check, select Show details.

For holdings under Unrealized gains & losses, an indication of whether the shares are covered or noncovered should appear immediately beneath "Show details." For holdings under Realized gains & losses, shares are considered to be covered if there's a blank space under the acquisition date.

Download, complete & mail a Cost Basis Method Election Form (PDF)