1. What is Cost Basis?

Cost basis represents the original value of an asset for tax purposes, usually the purchase price plus any associated costs. For shares, it's calculated by dividing the total investment (including fees) by the number of shares acquired.

2. How Does the Calculator Work?

The calculator uses the cost basis formula:

Where:

• \( Total\ Investment \) — Amount invested in USD
• \( Fees \) — Any associated purchase fees in USD
• \( Shares \) — Number of shares acquired

Explanation: The formula calculates the per-share cost by accounting for all money spent to acquire the shares.

3. Importance of Cost Basis Calculation

Details: Accurate cost basis is crucial for determining capital gains or losses when selling shares, which affects tax liability. It's essential for tax reporting and investment performance analysis.

4. Using the Calculator

Tips: Enter the total amount invested in USD, any associated fees in USD, and the number of shares acquired. All values must be valid (investment ≥ 0, fees ≥ 0, shares > 0).

5. Frequently Asked Questions (FAQ)

Q1: Why include fees in cost basis?
A: Fees are part of the total cost to acquire the shares and therefore should be included in the cost basis calculation.

Q2: How does cost basis affect taxes?
A: When you sell shares, the difference between sale price and cost basis determines your capital gain or loss, which is taxable.

Q3: What if I bought shares at different prices?
A: For multiple purchases, you'll need to calculate cost basis separately for each lot or use an average cost method (if allowed).

Q4: Does cost basis include dividends?
A: Only if you reinvested dividends to buy additional shares - those would be separate purchases with their own cost basis.

Q5: Where can I find my cost basis information?
A: Your broker should provide cost basis information on your account statements and tax documents (like Form 1099-B).