Last updated: January 19, 2026
Cost basis is what you originally paid for an investment, plus any commissions or fees. It's the starting point for calculating capital gains or losses.
For inherited assets, cost basis may be "stepped up" to fair market value at the time of inheritance. Gifted assets typically carry over the donor's cost basis.
Accurate cost basis records are essential for tax reporting. If you reinvest dividends or make multiple purchases, you'll need to track adjusted cost basis.
Understanding cost basis helps you make better investment decisions and plan for taxes. Use our track in calculator to see how it applies to your situation.
Add your purchase price plus any fees, commissions, and reinvested dividends. For inherited assets, it's typically the fair market value at the date of death.
FIFO (first in, first out), LIFO (last in, first out), specific identification, and average cost. Each affects your taxable gain differently.
It determines your capital gain or loss when you sell. Higher cost basis means lower taxable gain. Accurate tracking can save significant taxes.
Aswin oversees all content quality and data validation at TradingKite. With a background in engineering and a passion for financial transparency, he ensures every insight meets our rigorous editorial standards.
Data sourced via verified partners and processed through TradingKite's proprietary validation engine.
