Cost basis
What you paid, including commissions, used to figure the gain when you sell.
Where it is explained in full
How the wealthy pay less tax: the line between income and wealth, and the empty suite that does not exist. A friend earning two million a year asked how the very rich pay so little. The answer is not a secret and not a loophole. It is one line in the code, and everything else hangs on it. This page explains it, and corrects a story about commercial property that gets told at every dinner where the question comes up.
A definition says what a thing is; it never says whether it fits you. The guides explain how it works and name the professional who confirms it for a particular person. The No Advice Disclosure.
Words beside it
- basis
Basis is the amount of money you already paid tax on inside an account, so the IRS will not tax it again when you take it out. Keeping track of your basis is important during a backdoor Roth conversion so you do not accidentally pay tax twice.
- Basis (cost basis)
What you paid for an investment, including commissions, used to compute gains for tax.
- Dollar cost averaging
Investing a fixed amount on a schedule regardless of price.
- Fixed costs
Costs a business pays regardless of sales volume: rent, salaries, insurance.
- Opportunity cost
What you gave up by choosing this over the next best thing.
- Stepped up basis
Inherited assets get a new cost basis at the date of death, erasing the gain for tax.
- Variable costs
Costs that rise with each unit sold: materials, shipping, processing fees.
- zero cost collar
This is a collar where the money you collect from selling the call pays for the put, so the whole setup costs you little or nothing up front.
Ask about Cost basis
A model reads this page and answers from it. It will say when the answer is not on the page. Education, not personalized advice.