Understand what cost basis means and how it can affect your taxable capital gains and losses
TD Ameritrade offers a simple way to figure out your cost basis
Know how to view your positions in terms of realized and unrealized gains/losses and export the data for tax purposes
The term cost basis may sound like something you want to brush aside, but you can only do that for so long. Once tax time comes around and you have to figure out your capital gains and losses, cost basis will creep back into your life.
So, what is cost basis? It’s that ever-morphing figure that may elude even the best of us. By definition, cost basis is the original value of a stock investment or any asset, adjusted for stock splits, certain types of dividends, return of capital distributions, and other adjustments. Bottom line: It’s important. As an investor, you need to know the cost basis of your positions. In fact, brokers are required to report the cost basis to the IRS when an asset is sold. You don’t want the legendary IRS slogan “We got what it takes to take what you got” haunting you.
Computing your taxable gains and losses hinges on adjusted cost basis and holding periods. But finding cost basis values shouldn’t be as difficult as locating the Loch Ness monster. And you shouldn’t have to wait for your 1099 to start figuring out your taxes and liabilities. To make the process more efficient, TD Ameritrade offers an easy-to-use platform on the Cost Basis page powered by GainsKeeper®. To access the platform, just log into your account at tdameritrade.com, go to My Account, and select Cost Basis.
What Is the Cost Basis Page?
From realized gains or losses—new and old—to unrealized positions and their holding periods, the Cost Basis page has the information you need for tax reporting and can help you make educated decisions about your trading (see figure 1).
FIGURE 1: COST BASIS PAGE. The Cost Basis page has important tax reporting and trading information. These printable reports are available in PDF, XLS, TXF, and TXT formats. Chart source: tdameritrade.com. For illustrative purposes only. Past performance does not guarantee future results.
Lucky for you, you don’t need to be Merlin and cast a spell to find what you need. The Realized Gain/Loss tab lets you filter for a specific time period and displays sells and corporate action events, such as mergers and spin-offs (see figure 2). It shows wash sale information and any adjustments to cost basis (when applicable). You can also view whether your positions are categorized as long term or short term.
FIGURE 2: YOUR REALIZED GAINS/LOSSES. The Realized Gain/Loss tab shows sells, corporate action events, and more. View an entire tax year or choose a specific date range. Chart source: tdameritrade.com. For illustrative purposes only. Past performance does not guarantee future results.
The Unrealized Gain/Loss tab shows your open positions and their current market value (see figure 3). This lets you easily view how long you’ve held positions (aka “the term”) to help you make tax-efficient investing decisions.
FIGURE 3: CURRENT MARKET VALUE. The Unrealized Gain/Loss tab shows your open positions and their current market value. If multiple lots are held, you can drill down by selecting the + to the left of the security. Chart source: tdameritrade.com. For illustrative purposes only. Past performance does not guarantee future results.
The Cost Basis page also allows you to select specific lots as long as your realized event is still unsettled. Find them in the Unsettled Closed Positions tab. You can select the unsettled sale and then choose an open lot or lots to apply. Upon settlement, you’ll find the lots you selected applied to the Realized Gain/Loss tab, and TD Ameritrade will send your selection on to the IRS once tax reporting time rolls around.
This data can sometimes be cumbersome when served in large quantities, but you can export it into Excel or to a printer-friendly page.
You can also drill into adjustments made on fixed-income securities to see how your cost basis is being affected on either realized or unrealized holdings.
Make taxes a little less taxing.
The key to filing taxes is being prepared. TD Ameritrade provides information and resources to help you navigate tax season.