Ready to dive into the world of investing and get a handle on your taxes? Understanding your cost basis is a crucial step, and if you're a Vanguard investor, you're in the right place. Let's walk through exactly how to find this important number, so you can be prepared for tax season and make informed decisions about your portfolio.
Step 1: The Gateway to Your Portfolio - Log In!
First things first, you'll need to access your Vanguard account. It's the most secure and direct way to get the information you need.
Got your username and password ready? Great! Head over to the Vanguard website and log in to your account.
If you're using the mobile app, the process is just as simple. Just fire up the app and log in using your credentials.
Remember: Always use a secure and private internet connection when logging into financial accounts.
Step 2: Navigating to the Portfolio Tab
Once you're logged in, you'll be greeted by your account dashboard. This is your command center for all things Vanguard. To find your cost basis, you need to go to the Portfolio tab.
On the desktop website, look for the "Portfolio" tab at the top of the page. It's usually right next to "My accounts" or "Balances."
If you're on the mobile app, you'll likely find a similar menu or tab, often represented by an icon like a pie chart or a dollar sign.
Step 3: Unveiling the Cost Basis Information
Now that you're in the right place, you're just a few clicks away from seeing your cost basis.
Sub-heading: The 'Cost Basis' Dropdown
From the Portfolio tab, you should see a dropdown menu. Look for the option that says "Cost basis." This is your destination. Clicking on it will take you to a dedicated page that provides a detailed breakdown of your holdings and their associated cost basis.
Sub-heading: Understanding Your Holdings
On this page, you'll see a list of your investments. For each holding, Vanguard will display key information, including:
Security Name: The name of the fund, stock, or ETF.
Shares: The number of shares you own.
Cost Basis per Share: This is the average price you paid for each share, including any reinvested dividends.
Total Cost Basis: The total amount you have invested in that particular security.
Current Market Value: The current value of your investment based on the market price.
Gain/Loss: The difference between your total cost basis and the current market value. This is your unrealized gain or loss.
Step 4: Digging Deeper with Covered and Noncovered Shares
This is a crucial distinction, especially for tax purposes. You'll notice that Vanguard separates your shares into "covered" and "noncovered."
Covered Shares: These are generally shares purchased after January 1, 2012 (or after January 1, 2011, for stocks). For these shares, Vanguard is required to report the cost basis information to the IRS and you. This makes your tax reporting much simpler!
Noncovered Shares: These are shares you bought before the regulatory changes took effect. Vanguard will provide you with the cost basis for these, but they are not required to report it to the IRS. This means you are responsible for maintaining your own records for these older shares.
Step 5: Exploring Your Cost Basis Method
Vanguard provides different methods for calculating cost basis, and it's important to know which one you're using. The default method for most mutual funds is Average Cost, while for stocks and ETFs, it's typically First In, First Out (FIFO).
To see or change your method, look for a link or button on the cost basis page that says "View/Change cost basis method."
Why would you want to change it? Choosing a different method can have significant tax implications. For example, if you sell shares with a high cost basis first (Highest In, First Out or HIFO), you can minimize your taxable gains.
Step 6: Accessing Your Tax Forms
For the most accurate and official cost basis information for tax filing, you'll need your tax forms from Vanguard.
Go back to the main menu and look for "Tax forms & information" or a similar heading.
You'll find your Form 1099-B here. This form reports the proceeds from the sale of securities and often includes the cost basis of the sold shares.
Important: You are responsible for accurately reporting all sales to the IRS on Form 8949 and Schedule D, even for noncovered shares where Vanguard doesn't report the cost basis.
10 Related FAQ Questions
How to find the cost basis for a specific transaction?
To find the cost basis for a specific transaction, navigate to your account history or transaction history within your Vanguard account. You can filter by date and transaction type to see the details, including the cost basis, for each individual purchase and sale.
How to change my cost basis method on Vanguard?
To change your cost basis method, go to the "Cost basis" page for your holding, and click on "View/Change cost basis method." You will be able to select from options like FIFO, HIFO, and MinTax, and for mutual funds, you can select Average Cost. Be aware that changing the method for covered shares can lock you into that choice for future sales.
How to get a paper copy of my cost basis information from Vanguard?
Vanguard provides the option to download and mail a "Cost Basis Method Election Form (PDF)." You can typically find a link to this form on the cost basis page or in the "Forms" section of the website.
How to interpret "covered" and "noncovered" shares?
Covered shares are those purchased after a specific date (generally 2011 for stocks and 2012 for mutual funds/ETFs) for which Vanguard reports the cost basis to the IRS. Noncovered shares are older holdings, and you are responsible for tracking and reporting their cost basis to the IRS.
How to calculate cost basis for a mutual fund with reinvested dividends?
Vanguard's default Average Cost method for mutual funds automatically handles this. It averages the cost of all your shares, including those purchased through reinvested dividends and capital gains distributions.
How to find my total cost basis for my entire Vanguard portfolio?
While Vanguard provides the cost basis for individual holdings, you can sum the total cost basis for each security on the "Cost basis" page to calculate the total for your entire portfolio.
How to use cost basis for tax-loss harvesting?
You can use the "Specific Identification" method (SpecID) to choose which lots of shares to sell. By selling lots with a high cost basis, you can realize losses to offset gains and potentially lower your tax bill.
How to find my Form 1099-B on Vanguard's website?
Log in to your account, go to "Tax forms & information," and you will find your Form 1099-B available for download. It typically becomes available in late January or February each year after a sale.
How to handle a missing cost basis for a security on my Vanguard account?
If your cost basis is missing (often for noncovered shares or transferred securities), you are required by the IRS to reconstruct your own records. You can use old statements, trade confirmations, or other records to determine the original purchase price.
How to find information on my adjusted cost basis?
Vanguard automatically adjusts the cost basis for certain events, such as dividend reinvestments. You can see your adjusted cost basis on the "Cost basis" page for your holdings. For more complex adjustments, such as those related to wash sales, you may need to consult a tax advisor.
