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SmartAsset: How to Find Cost Basis of Old Stock

Buy low and sell high is one of the most fundamental rules of stock investing. Knowing the cost basis of the stocks you purchase can help you estimate your potential profit should you decide to sell. You may also need to know the cost basis for tax purposes when you’re reporting capital gains or capital losses. But, if you’re not sure exactly what you paid, there are a few options for how to find the cost basis of old stock. Here’s what you need to know.

A financial advisor can help you create a financial plan for your needs and goals.

What Is Cost Basis?

Cost basis is the original purchase price of an asset. When you buy stocks, mutual funds or other securities, your cost basis is the price you pay for it on the day that you purchase it. Cost basis includes the asset’s price, along with brokerage fees, mutual fund load fees and any other costs you pay to trade.

There are different reasons why you might need to know how to find the cost basis of old stock or other assets. As mentioned, you can use the cost basis to estimate how much of a capital gain you might realize by selling stocks that have increased in value. That can be useful when weighing whether to sell now or hold onto your investments a little longer.

Capital gains from the sale of stocks or other investments are taxable under IRS rules. The short-term capital gains tax rate applies to investments held for less than one year. You’ll pay the more favorable long-term capital gains tax rate for investments held longer than one year.

Cost basis can also tell you how much of a capital loss you might realize if you’re selling off stocks that have dropped in value. The IRS allows investors to deduct up to $3,000 in capital losses from ordinary income each year, or $1,500 in the case of married couples who file separate returns.

How to Find the Cost Basis of Old Stock

To find the cost basis of old stock, you’ll first need to know what you paid for it. This task may be simple, depending on when you purchased the investment. The tax code requires brokerages to report your cost basis to the IRS when you sell an investment. But this rule only applies if the investment was purchased on or after specific dates.

For example, reporting is required if you purchased:

  • Equities on or after January 1, 2011
  • Mutual funds, exchange-traded funds (ETFs) and dividend reinvestment plans (DRIPs) on or after January 1, 2012
  • Bonds, options and other securities on or after January 1, 2014

Cost basis is reported on IRS Form 1099 B. If you receive a Form 1099 B and the cost basis box is empty, there are other ways to find the cost basis for old stock.

First, you can log in to your brokerage account and review your transaction statements for the time period when you purchased the stock. Keep in mind that if you bought shares of the same stock on different dates then you may have to look through multiple statements or transaction confirmations.

If you can’t find the information you need online, then you can try calling the brokerage to see if they can provide some numbers for you. You can also look through historical stock pricing data to find the stock’s average price for the day you bought it. If that fails, you may be able to get historical price data directly from the company.

How to Calculate Cost Basis for Old Stock

SmartAsset: How to Find Cost Basis of Old Stock

There are a couple of ways you can approach accounting when trying to find the cost basis of old stock. First, you can use the “first in, first out” (FIFO) method, which is usually recommended if you bought multiple shares of the same stock on different dates.

If you’re calculating cost basis using first in, first out rules then you’d use the price you paid for the shares initially. This method assumes that the shares you purchase first are the ones you pay the least amount of money for.

So, say you buy 100 shares of stock in XYZ company on March 1, again July 1 and once more on October 1 of the same year. You pay $100 per share in March, $125 per share in July and $140 per share in October. The first in, first out method would use the $100 per share you paid back in March to calculate your cost basis for any shares you sell.

First in, first out is a simple way to calculate cost basis. But it can result in a larger capital gain being realized on paper, which could mean owing more in taxes when selling stocks at a profit. Some brokerages use this method to calculate cost basis automatically unless you choose the specific identification method.

The specific identification method means you can choose which shares of stock are sold, based on what you originally paid for them. So using the previous example, you could decide which price point ($100, $125 or $140) should be used for calculating your cost basis.

This method could potentially reduce your tax liability by minimizing capital gains but it does require a little more homework on your part. You’ll need to know what you paid for the stocks each time you purchased. You’ll also need to be specific in telling your broker which shares to sell, i.e. sell 100 shares of XYZ stock that were purchased on March 1 for $100 each.

Cost Basis Recordkeeping Tips for Investors

Depending on when you purchased stocks or other investments, your brokerage should be keeping track of your cost basis for you. But it can still be a good idea to maintain your own records so you have a backup.

Here are three tips that FINRA suggests for keeping track of cost basis when buying and selling stocks:

  • Save the transaction confirmations your brokerage sends you each time you make a trade
  • Make note of any stock dividends paid out to you or non-dividend distributions since these can factor in to cost basis calculations
  • If you’re buying multiple shares of the same stock and plan to use specific identification for cost basis calculations, make a note of the date shares are purchased and the price

Also, keep in mind that you may need to use a different method to find the cost basis for shares of stock that you inherit or receive as a gift. In that case, you may need to make your calculations using the original owner’s basis or the fair market value of the stocks at the time you received them.

Bottom Line

SmartAsset: How to Find Cost Basis of Old Stock

Knowing how to find cost basis of old stock matters for tax reporting when you’re buying or selling investments. The more you’re able to minimize tax liability the more of your investment returns you’re able to keep.

Tips for Investing

  • Consider talking to your financial advisor about finding the cost basis of old stock, if you’re unsure of which method to use. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Tax-loss harvesting can help you to minimize your tax bill if you’re reporting capital gains. Harvesting losses simply means selling off stocks at a loss to offset gains in your portfolio. If you’re investing through a robo advisor, this may be done for you automatically. But you can harvest losses yourself through a taxable brokerage account.

Photo credit: ©iStock.com/Worawee Meepian, ©iStock.com/Prostock-Studio, ©iStock.com/Drazen_

Rebecca Lake Rebecca Lake is a retirement, investing and estate planning expert who has been writing about personal finance for a decade. Her expertise in the finance niche also extends to home buying, credit cards, banking and small business. She's worked directly with several major financial and insurance brands, including Citibank, Discover and AIG and her writing has appeared online at U.S. News and World Report, CreditCards.com and Investopedia. Rebecca is a graduate of the University of South Carolina and she also attended Charleston Southern University as a graduate student. Originally from central Virginia, she now lives on the North Carolina coast along with her two children.
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