How do you calculate the cost basis of a stock dividend?

Cost Basis Example After a year has passed, the value of the stock has risen to $15 per share, and you decide to sell. Now you need to know your cost basis to calculate the tax amount for which you are liable.

Are stock dividends included in cost basis?

Cash dividends do not lower the cost basis of an investment, either when you actually receive cash or when you use the proceeds to purchase new shares. A stock dividend, however, does adjust cost basis, as does a “return of capital.” However, splits and stock dividends do.

Do stock dividends increase cost basis?

Reinvesting dividends increase the cost basis of a stock because dividends are used to buy more shares. The average cost basis method is commonly used by investors for mutual fund tax reporting. A cost basis method is reported with the brokerage firm where your assets are held.

How are stock dividends treated for tax purposes?

For retirement accounts, stock dividends are not taxed. In a non-retirement account, qualified dividends are taxed at long-term capital gains rates depending on your tax bracket (federal rates are 0\%, 15\%, or 20\%), while non-qualified dividends are taxed at ordinary income rates just like regular income.

How much taxes do you pay on dividends?

Qualified dividends are taxed at 0\%, 15\%, or 20\%, depending on your income level and tax filing status. Ordinary (non-qualified) dividends and taxable distributions are taxed at your marginal income tax rate, which is determined by your taxable earnings.

How do I find cost basis for old stock?

If you know when the stock was purchased, here are some tips:

1. Sign in to your brokerage account.
2. Look at previous broker statements.
3. Contact your brokerage firm.
4. Go online for historical stock prices.
5. Go directly to the source.