Cost Basis Calculator

About the Cost Basis Calculator

When you sell shares purchased at different times and prices, the lot-identification approach you use directly affects your taxable gain or loss. FIFO (first in, first out) sells the oldest shares first, reverse-order matching sells the newest shares first, and average cost spreads total basis evenly across all shares. Each approach can produce a different tax result.

Our Cost Basis Calculator lets you enter multiple purchase lots and a sale quantity, then compares the gain or loss under FIFO, a newest-lot comparison, and average cost. Use it to see how lot selection changes taxable results before you place a sell order. Tax-lot selection affects not just the current tax bill but also which low-basis or high-basis shares remain in the account after the trade.

When This Page Helps

Choosing the right basis method can materially change the taxable gain on a sale. Selling high-basis lots first reduces the current gain, while selling low-basis lots leaves more high-basis shares for later. This calculator makes those tradeoffs visible before you execute the order with your broker.

How to Use the Inputs

1. Enter each purchase lot: date (for reference), number of shares, and price per share.
2. Enter the number of shares you plan to sell.
3. Enter the sale price per share.
4. Review the gain or loss under FIFO, newest-lot comparison, and average cost methods.
5. Choose the method that best fits your tax situation.
6. Inform your broker of your lot selection method before or at the time of sale.

Example Calculation

Tips & Best Practices

• FIFO is often the default when shares are not specifically identified; it often produces the largest gain in rising markets.
• Specific identification through your broker offers the most flexibility; the newest-lot comparison here is a planning proxy rather than a filing election by itself.
• Average cost is generally available for mutual-fund and DRIP shares, not every individual stock position.
• Once you elect average cost for an eligible mutual fund, IRS rules can limit later changes.
• Pair this calculator with a capital-gains tax tool if you want to compare the after-tax effect of each basis choice.
• Keep detailed records of all purchase dates, quantities, and prices for accurate basis tracking.

Why Cost Basis Methods Matter

The way shares are identified for sale directly affects reported gain or loss. In a portfolio built through multiple purchases, the difference between FIFO and a higher-basis share selection can materially change the tax outcome.

FIFO vs. Newest-Lot Comparison vs. Average Cost

FIFO sells the oldest shares first. In steadily rising markets, those are often the cheapest shares and can create the largest gain. A newest-lot comparison does the opposite and shows what happens when the most recently purchased shares are used first. Average cost divides the entire portfolio cost by total shares and is mainly relevant for eligible fund holdings.

Practical Recommendations

For individual stocks and ETFs, specific identification with your broker gives the most control over which lots leave the account. For mutual funds in taxable accounts, average cost is commonly available and simplifies record-keeping. In tax-advantaged accounts, basis method is usually less important because the account structure drives the tax treatment.

Frequently Asked Questions

• What is cost basis?

  Cost basis is the original purchase price of an investment plus adjustments such as commissions or reinvested amounts where applicable. It is subtracted from sale proceeds to determine capital gain or loss for tax purposes.

• Which cost basis method is best?

  It depends on your tax situation. In a rising market, selling higher-basis shares first usually minimizes the current gain. For individual stocks, that is often handled through specific identification with the broker. Average cost simplifies record-keeping for eligible fund holdings but offers less tax-planning flexibility.

• What is the wash sale rule?

  If you sell shares at a loss and repurchase substantially identical shares within the wash-sale window, the loss may be disallowed and added to the basis of replacement shares. This page does not model wash-sale adjustments.

• Can I change my cost basis method after selling?

  For stocks and ETFs, lot identification usually has to be established with the broker at or before the sale. For mutual funds, average-cost elections have separate IRS rules and may limit later changes. Check your broker records and IRS guidance before assuming a past sale can be reclassified.

• How are dividends reinvested through a DRIP handled?

  Each dividend reinvestment creates a new lot with its own basis equal to the amount reinvested. Over time this can create many small lots, which is why accurate record-keeping matters for partial sales.

• What happens to cost basis in a stock split?

  In a stock split, the total basis stays the same but is spread across more shares. For example, in a 2-for-1 split, the share count doubles and the per-share basis is halved.