ETF Cost Basis - Fidelity (2024)

FAQs

What is the cost basis of an ETF? ›

Like stock, an investor's basis in ETF shares usually is based on cost—what you paid for the shares, plus any sales commissions.

On the Fidelity.com home page, select the Accounts & Trade tab, then Update Accounts/Features, then select Cost Basis Information Tracking. Under Default Disposal Method, select Change. You'll see a list of all available cost basis tracking methods. Select the method and then Save.

Cost basis is the original monetary amount paid for shares of a security. When you sell or exchange shares of mutual funds or other securities, you may have a capital gain or loss that must be reported to the IRS.

How do we stand apart from the rest? $0 commissions for online US stock, ETF, and option trades.

Basis. Like stock, an investor's basis in ETF shares usually is based on cost—what the investor paid for the shares, plus any sales commissions. (Different rules apply if the investor receives shares by gift or inheritance.) Basis is increased by any taxable dividends that are reinvested in additional ETF shares.

Exchange-traded funds have different tax rules, depending on the assets they hold. For most ETFs, selling after less than a year is taxed as a short-term capital gain. ETFs held for longer than a year are taxed as long-term gains.

The IRS expects taxpayers to keep the original documentation for capital assets, such as real estate and investments. It uses these documents, along with third-party records, bank statements and published market data, to verify the cost basis of assets.

The bottom line is that the IRS expects you to maintain records that identify the cost basis of your securities. If you don't have adequate records, you might have to rely on the cost basis that your brokerage firm reports—or you may be required to treat the cost basis as zero, which could mean owing more in taxes.

Cost Basis Reporting Requirements

Taxpayers have a long-standing responsibility to report gains and losses, and related cost basis information when they file their income tax returns. Brokers, such as Fidelity, also have a requirement to report sales information to the IRS on Form 1099-B.

You can calculate your cost basis per share in two ways: Take the original investment amount ($10,000) and divide it by the new number of shares you hold (2,000 shares) to arrive at the new per-share cost basis ($10,000 ÷ 2,000 = $5.00).

Does cost basis transfer to Fidelity? ›

How does my cost basis information transfer? If your delivering firm participates in the Cost Basis Reporting Service (CBRS), your cost basis information will transfer when you complete Fidelity's online transfer submission process. Cost basis data is typically passed within ten days after the transfer.

It means that position is affected by a wash sale.

If you sell a position at a loss and purchase that position again 30 days before or 30 days after the sell, the IRS considers this a “wash sale” and disallows the investor to take the benefit of a realized loss.

Fidelity: Costs. Vanguard and Fidelity charge $0 commissions for online equity, options, and ETF trades for U.S.-based customers. Fidelity has a $0.65 per contract option fee; it's $1 at Vanguard.

Vanguard and Fidelity Fees

To trade stocks, ETFs, options and most mutual funds, clients of both firms will avoid commissions altogether. Options at Vanguard come with a $1 contract fee, while Fidelity charges an even lower $0.65 contract fee.

Weigh the pros and cons of each calculation method to pick one that best fits your investing style and tax situation. When we calculate cost basis for your Vanguard investments, we'll automatically use "average cost" for mutual funds and "first in, first out" for individual stocks.

Want to view or change your cost basis method? Log in to vanguard.com. Then, from My Accounts, select Cost basis and then View/Change cost basis method. You can also select your cost basis method at the time of sale.

Another noteworthy tax feature of commodity ETFs is the 60/40 rule, which states that any gains or losses realized by selling these types of investments are treated as 60% long-term gains (up to 23.8% tax rate) and 40% short-term gains (up to 40.8% tax rate).

Just as with individual securities, when you sell shares of a mutual fund or ETF (exchange-traded fund) for a profit, you'll owe taxes on that "realized gain." But you may also owe taxes if the fund realizes a gain by selling a security for more than the original purchase price—even if you haven't sold any shares.