Taxes

What Is Cost Basis?

Cost basis is the original value of an asset for tax purposes, generally its purchase price plus certain costs such as commissions or fees. When the asset is sold, the capital gain or loss equals the sale proceeds minus the cost basis. The basis can later be adjusted, for example by reinvested dividends or improvements to property.

Example

Shares bought for 4,000 plus a 10 fee have a basis of 4,010. Selling them for 5,000 produces a gain of 990.

Home Improvements

For real estate, qualifying capital improvements add to the basis, which reduces the taxable gain when the property is sold.

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🔗 Related Terms

Capital Gain Capital Loss Capital Gains Tax Dividend Reinvestment Plan (DRIP)

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.