How do you keep track of cost basis?

The easiest way to track and calculate cost basis is through brokerage firms. Whether an investor has an online or traditional brokerage account, firms have very sophisticated systems that maintain records of transactions and corporate actions related to stocks.

When did brokerage firms have to start tracking cost basis?

Jan.1, 2011
Brokers must begin reporting cost basis to the Internal Revenue Service and to taxpayers for trades beginning Jan. 1, 2011; fund companies have until 2012 to comply. Custodians are not required to comply with the legislation, but they provide the technology as a service to their broker-dealer clients.

When to use cost basis for stock investment?

There are several issues that come up when numerous investments have been made. The Internal Revenue Service (IRS) says if you can identify the shares that have been sold, their cost basis can be used. For example, if you sell the original 1,000 shares, your cost basis is $10.

Why is it important to track cost basis?

Investors generally have to pay close attention to the impact of taxes on their portfolios, especially when they decide to sell a stock that has gone up in value. Tracking cost basis is incredibly important to make sure you don’t overpay your taxes on capital gains in a regular taxable account.

When do you need to track your tax basis?

Thanks to a law passed in 2008, taxpayers receive help keeping track of their tax basis. The law requires brokers to track the basis of specified securities (including stocks and mutual fund shares) purchased in 2011 and later years, and report the basis amounts to investors (and the IRS) when the securities are sold.

Why do you need to keep track of stock dividends?

Keep track of stock dividends or non-dividend distributions you receive because they may affect the cost basis of your shares. If you received the securities as a gift or through an inheritance, you may have to find the fair market value of the securities when they were given to you or you may need the previous owner’s adjusted basis.