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Covered & noncovered shares

Find out what "covered" and "noncovered" mean and how this designation will affect the way we report your cost basis to the IRS.

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 reporting is sent only to you. You are responsible for reporting the sale of noncovered shares.

Definitions vary by investment type


Stocks & certain exchange-traded funds (ETFs)*

COVERED SHARES

Bought on or after January 1, 2011, and subsequently sold.

NONCOVERED SHARES

Bought before January 1, 2011, and subsequently sold.


Mutual funds**, ETFs***, and dividend reinvestment plans (DRIPs)

COVERED SHARES

Bought on or after January 1, 2012, and subsequently sold.

NONCOVERED SHARES

Bought before January 1, 2012, and subsequently sold.


Less complex bonds and most options†

COVERED SHARES

Bought on or after January 1, 2014, and subsequently sold.

NONCOVERED SHARES

Bought before January 1, 2014, and subsequently sold.


More complex bonds and certain related options††

COVERED SHARES

Bought on or after January 1, 2016, and subsequently sold.

NONCOVERED SHARES

Bought before January 1, 2016, and subsequently sold.

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, so you're responsible for your recordkeeping if you used another method.

REFERENCE CONTENT

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Dividend reinvestment plans (DRIPs)

The automatic reinvestment of shareholder dividends into more shares of the company's stock.