# Cost basis

> Cost basis is what you paid for an investment, adjusted for things like reinvested dividends, and it is subtracted from the sale price to figure your taxable gain or loss.

Canonical page: https://find.wellspent.co/glossary/cost-basis/
Also called: basis, tax basis

If you buy shares for $10,000 and sell them for $15,000, your gain is $5,000 and the $10,000 is your basis. Reinvested dividends were taxed when paid and add to your basis, so they aren't taxed again when you sell.

When you hold several lots of the same investment bought at different prices, which lot you sell changes the tax. Brokers apply a default method, often first in, first out, but you can usually pick specific lots, for example selling the highest-cost shares first to keep the gain small.

Inherited and gifted assets follow different rules. Inherited assets generally take a new basis equal to their value at the date of death (a step-up in basis). Gifts generally keep the giver's original basis.

## How to check

Your brokerage shows basis by lot on its unrealized gains page and reports sales to the IRS on Form 1099-B. For old or transferred holdings, check that the basis isn't missing, because a missing basis can be treated as zero.

## Sources

- [IRS Topic 703: Basis of assets](https://www.irs.gov/taxtopics/tc703)
- [IRS Publication 550: Investment income and expenses](https://www.irs.gov/publications/p550)
- [IRS Publication 551: Basis of assets](https://www.irs.gov/publications/p551)

## Related terms

- [Step-up in basis](https://find.wellspent.co/glossary/step-up-in-basis.md)
- [Tax-loss harvesting](https://find.wellspent.co/glossary/tax-loss-harvesting.md)
- [ACATS (account transfers)](https://find.wellspent.co/glossary/acats.md)