How to Calculate Cost Basis for Stocks

Cost basis is a measure of the amount of the original investment in a stock or other security. It is often used to calculate capital gain or loss, especially for tax purposes. The gain or loss is the price which the stock was sold at minus the cost basis. This article will tell you how to calculate cost basis for stocks.

Instructions

Difficulty: Moderately Easy

How to Calculate Cost Basis for Stocks

1. Look up your financial records for the stock whose cost basis you want to calculate.
2. Determine the initial amount of money invested. For example, if you invested $1000 for Stock XYZ, the cost basis is $1000.
3. Cost basis can also be measured per share. If you bought 100 shares of Stock XYZ for $1000, then the cost basis per share is $10.
4. Cost basis can be more difficult to calculate if you invested in the same stock multiple times at different prices. The best way to calculate cost basis in this case is to apply the simple formula for of FIFO (first in first out). This means that if you bought the original 100 shares at $10 and another 100 shares at $15, then the cost basis for selling the first 100 shares is $10 per share but after that, the cost basis is $15 per share.
5. Cost basis is also adjusted for commission, stock splits, dividends, takeovers, and more. Your broker or financial adviser should be able to assist you if one or more of these conditions apply to your stock.

Tips & Warnings

• If using a brokerage, cost basis for your investments is usually calculated automatically and sent to you at the end of every year.