How to Calculate Cost Basis for Tax Filing
- 1). Gather all of your brokerage and mutual fund statments. You will need these statements to determine your level of capital gains and your original cost basis.
- 2). Contact your mutual fund companies and brokerage firms and ask them for cost basis information. If you have done all of your buying and selling with a single firm, that company may have the cost basis information available for you to use.
- 3). Log on to your computer and open your favorite spreadsheet program. Save the new spreadsheet to your hard drive and start to build the fields. Place each of your investments on a separate line, i.e. each stock you own and each mutual fund would be on a separate line.
- 4). Create columns for the initial purchase price of each stock and mutual fund that you own. Add additional columns for each additional investment you made. Also add a column for the capital gains that are reported each year on the 1099 the firm sends you. Since you must pay taxes on these gains, that money will be added to your cost basis.
- 5). Create a formula to add all of the columns for each row in your spreadsheet. For instance, if the columns in your spreadsheet range from column A to column H and the stock in question is recorded on row 5, the formula would read "=SUM(A5:H5). To get the total cost basis, you would place the original cost of the holding in cell A5 and the amounts of any capital gains in cells B5 through H5. The total cost basis is arrived at by adding all of those costs together.
- 6). Keep your spreadsheet updated each time you make a new stock or mutual fund purchase. If you hold an individual stock, you will only owe capital gains taxes when you actually sell that stock. But if you own a stock mutual fund, capital gains will be generated each year as the fund managers buy and sell stocks. That is why it is so important to keep track of the capital gains that are passed along to you and add those gains to your cost basis when you receive your 1099 each year. This will allow you to have an updated cost basis available when you do sell your mutual fund shares.