Question 1

How do I calculate my cost basis?

Accepted Answer

Cost basis is what you paid: for each purchase (lot), multiply shares by the price per share and add any commission or fee. Your total cost basis is the sum across all lots, and your average cost per share is that total divided by total shares. Selling requires matching sold shares to specific lots — by default brokers use FIFO (first-in, first-out), consuming your oldest shares first — and your gain or loss is sale proceeds minus the basis of the specific shares sold. This calculator does all of that from your lot list, entirely in your browser.

Question 2

How does return of capital affect cost basis?

Accepted Answer

Return of capital (ROC) — common in high-yield income ETFs — is not taxed when received; instead it reduces your cost basis dollar for dollar. Receive $2/share of ROC on shares you bought at $20 and your basis becomes $18: no tax today, but a larger capital gain (or smaller loss) when you sell. If cumulative ROC ever exceeds your basis, the excess is taxed as capital gain in that year. Income-ETF holders who ignore ROC routinely think they're selling at a loss when the IRS sees a gain — this calculator applies the adjustment explicitly.

Question 3

What's the difference between FIFO and average cost basis?

Accepted Answer

FIFO (first-in, first-out) sells your oldest shares first — each sale consumes specific lots, and each lot keeps its own purchase date (which determines long- vs short-term treatment). Average cost pools every share at one blended price — simpler, but under IRS rules the average-cost method is only available for mutual funds and most dividend-reinvestment shares, not for ordinary stock or ETF lots, and once used it can lock you in. For stocks and ETFs, FIFO is the default and specific-lot identification (choosing which lots to sell at trade time) is the optimizer's tool.

Question 4

Why do long-term and short-term gains matter?

Accepted Answer

Shares held more than one year qualify for long-term capital gains rates (0%, 15%, or 20% for most filers) while shares held a year or less are taxed as ordinary income — often a 10-20+ point difference. Because each lot has its own clock, one sale can produce both kinds at once under FIFO. This calculator splits every modeled sale into its long- and short-term components by lot date, so you can see what waiting a few weeks would change.

Question 5

What if I don't know my cost basis?

Accepted Answer

For shares bought after 2011 (2012 for funds), your broker is required to track and report basis — check the positions or tax-lots page, or Form 1099-B after a sale. For older, transferred, inherited, or gifted shares: inherited shares generally get a stepped-up basis equal to market value on the date of death; gifted shares carry the giver's original basis; and otherwise you can reconstruct basis from trade confirmations or historical prices on the purchase dates. When records are truly gone, the IRS can treat basis as zero — making the entire sale taxable — so reconstructing even an estimate is worth the effort.

Cost Basis Calculator

How This Calculator Works (and What It Won't Pretend)

Track Basis, ROC & Payouts All Year