Cost basis is how much you paid for shares of a security The average cost basis method is an IRS-approved way to determine the average price that you paid for mutual fund shares only, not individual securities.
With the average cost-single category (ACSC) method, you calculate the cost basis based on the average price paid for all shares, regardless of how long you owned them. With the average cost-double category (ACDC) method, you determine two cost bases: a short-term one for shares owned less than one year and a long-term one for shares owned more than one year.
Things You'll Need
- Mutual fund statements
Calculating Average Cost Basis
To use ACSC, go through your mutual fund statements and add up the total amount that you paid for your mutual fund shares. This includes dividends that were reinvested to buy additional shares.
Divide the total amount paid by the number of shares owned and you have the average cost basis.
If you want to use ACDC instead of ACSC, determine how many shares you have owned for less than a year and how many shares you owned for a year or longer. Determine the amount paid for each. Divide the amount paid by the number of shares.
Tips & Warnings
- The ACSC method is most frequently used.
- Most mutual funds track the cost basis for you on your statements.
- If you use the average cost method for a particular fund, you can't change to another method unless you get the OK from the IRS.
How to Calculate Average Cost
There is nothing mystical or deceiving about average cost. It is an extremely straightforward accounting concept. The calculation gives the average cost...
Cash Basis Accounting Vs. Accrual Basis Accounting
There are two methods of determining your accounting that are commonly used in business. One is the cash method and the other...
How to Calculate Cost Basis
Cost basis is a measure of the amount of the original investment in a stock or other asset. It is often used...
Calculating Cost Basis ESPP
When purchasing stocks periodically throughout your career through an employer stock purchase plan (ESPP), calculating cost basis can get a little confusing....
How to Calculate the Cost Basis for Mutual Funds
If you make a profit from your investments, it is referred to as "capital gains" in the financial and taxation world. These...
How to Calculate the Cost of Recovery Methods
The cost of recovery method is how to account for revenue that does not recognize any profit until the cost of the...
How to Calculate Weighted Cost
The weighted average cost of capital is used by business executives to calculate a firm's average cost of its financing sources. A...
How to Compute Weighted Average Unit Price
Companies with inventory often use the weighted average method for calculating inventory costs. The weighted average method is based on the total...
The Average Value Method for Economics
The average value method, sometimes called the average cost method in accounting, provides an easy way to make a variety of determinations...
FIFO Vs. Average Cost Method
Under federal tax law, you have to pay taxes on realized gains in the value of assets that you sell, including mutual...
The Weighted-Average Method of Process Costing
Many businesses use process cost accounting to calculate the cost of their inventory and their cost of goods sold. Inventory values appear...