Financial glossary
Cost Basis
In plain English
The tax starting value of an asset, generally purchase cost adjusted for reinvestment, improvements, returns of capital, or prior deductions.
Cost basis
Cost basis is the tax starting value used to measure gain or loss when an asset is sold or otherwise disposed of. It often begins with purchase price plus eligible acquisition costs, but it may change over time.
Reinvested distributions, improvements, assessments, returns of capital, depreciation, stock splits, wash sales, gifts, inheritance, and corporate actions can adjust basis. Brokerage statements may report basis for covered securities, but taxpayers still need to verify completeness and accuracy.
The simplified relationship is:
capital gain or loss = proceeds − adjusted cost basis − eligible selling costs
An incorrect basis can materially overstate or understate taxable gain. Determine net short- and long-term gains under the applicable reporting rules before entering them in the capital gains tax calculator.
Related calculators
- 2026 Capital Gains Tax CalculatorEstimate 2026 federal tax on short- and long-term capital gains using ordinary brackets and the 0%, 15%, and 20% long-term thresholds.
- Investment CalculatorProject investment growth from a starting balance and monthly deposits. Include annual fees and compare the future balance with value in today’s dollars.
- Investment Fee CalculatorSee how an annual expense ratio reduces your ending portfolio through direct fees and lost compounding across decades of regular contributions.