If you sell mutual funds or stock shares, it’s important you know the basis of the shares. Knowing the basis lets you accurately calculate your capital gain or loss. To calculate your gain or loss on the sale of the shares, subtract your basis from the amount you received for the shares.
When calculating the basis of stock or mutual fund shares you sell:
- Make sure the amount you’re starting with is correct. To learn more about your starting basis, see the Original Basis and the Shares Bought Through Reinvestment tax tips.
- Look at events that have happened since you bought the shares. Some might have changed the shares’ basis (Ex: nontaxable distributions). To learn more, see the Adjusted Basis tax tip.
You can use these methods to calculate the basis of mutual funds:
- Average-basis method
- Specific identification method
- First-in, first-out method
However, you can’t use these methods to calculate the basis for stocks.
Learn more about Form 8690 and the IRS net investment income tax from the tax experts at H&R Block.
Learn more about tax exempt dividends and get tax answers at H&R Block.
What should you know before you calculate the cost basis of stocks for tax purposes? Learn more from the tax experts at H&R Block.
Learn more about the sales expenses associated with the sale of stock and how to report it on the tax form 1099-b from the tax experts at H&R Block.