When it comes to tax season, Cost Basis is one of the most important concepts to understand. In short, cost basis is the original value of an asset for tax purposes. This includes not just the purchase price, but also adjustments for stock splits, dividends and return of capital distributions.It's important to know your cost basis because it affects how much you owe in taxes when you sell an asset. If you don't keep track of your basis accurately, you could end up paying more or less than necessary.Fortunately, there are a number of ways to calculate your cost basis easily and accurately. For individual stocks, many online brokers offer calculators that will do all the work for you automatically. You can also use software programs or even spreadsheets to help keep track.For mutual funds and other investments that aren't as easy to track individually, most financial institutions provide detailed information about adjusted cost bases in annual statements and 1099 forms after each year's end.
