Tax

What is cost basis — and what is Form 1099-B?

Your cost basis is what a stock or fund cost you: the purchase price plus any commission. When you sell, the taxable gain is sale price minus cost basis — so the basis is the number that decides your tax. Every February your broker sends Form 1099-B listing each sale of the previous year, usually with the basis and whether the gain was short- or long-term, and sends the same to the IRS. You copy it onto Form 8949 and Schedule D.

Tax is national. This page describes the federal rules in the United States for tax year 2026. Most states add their own income tax on top, so there is never one single US rate. If you live and pay tax in another country, the rules are different — see the flags below.

The price is just the price — and it moves all the time.

How it works

Bought at different prices? Unless you say otherwise, brokers use first in, first out (FIFO): the oldest shares are sold first. You can instead choose specific identification — "sell the 50 shares I bought at $80" — before the trade settles.
Reinvested dividends count. Every dividend you reinvest buys shares with their own basis. Forgetting them means paying tax twice on the same money.
Covered vs non-covered. For shares bought since 2011 (2012 for funds) the broker must report the basis. For older or transferred shares it may show blank — then you must find it yourself.
Adjustments. A wash sale adds a disallowed loss to the basis; a stock split divides it; a return of capital lowers it.
Inherited or gifted shares have special rules — see step-up in basis.

The worked example

You bought 100 shares at $40 in 2022 and 100 more at $70 in 2025. In 2026 you sell 100 at $75. FIFO: gain = (75 − 40) × 100 = $3,500, long-term. Specific identification of the 2025 lot: gain = (75 − 70) × 100 = $500, long-term if held over a year. Same sale, $3,000 less taxable gain — the choice must be made with the broker before settlement.

Figures for 2026 from irs.gov (Rev. Proc. 2025-32 and IR-2025-111), checked September 2026. Your state may tax the same income again. Kiggo does not calculate your tax — your broker reports to you on Form 1099, and the IRS, your state and a tax professional decide.

Kiggo says: Cost basis is your receipt. The IRS taxes the difference between the receipt and the sale — so keep the receipt, and choose which one you hand over.

The typical beginner's mistake

Letting the broker sell the oldest, cheapest shares by default in a year when you needed a small gain — and paying tax on $3,500 instead of $500. Or losing the basis on shares transferred from an old broker and being taxed as if it were zero.

How you see it in Kiggo

Enter your own purchases in Kiggo's portfolio, and it shows what you paid for each position and the gain since. It does not work with tax lots and does not calculate your tax.

Frequently asked questions

What is Form 1099-B?

The form your broker sends you and the IRS by mid-February listing every sale of stocks, ETFs and funds in the previous year, with proceeds, cost basis (when known), dates and whether the gain was short- or long-term.

What if my 1099-B shows no cost basis?

The shares are "non-covered" — bought before 2011 or transferred in without records. You must determine the basis yourself from old statements. Without proof the IRS can treat the basis as zero.

Can I choose which shares to sell?

Yes — specific identification — but you must tell the broker which lot before the trade settles, and the confirmation must show it. Otherwise FIFO applies.

Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-22.

Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.