How to Handle Brokerage Fees in Stock Cost Basis Calculation

When you purchase a stock, the brokerage fee is indeed added to your cost basis. In your example, buying at $135 with a $12.50 fee gives you a cost basis of $147.50 - you've got that part right. However, when you sell the stock, the brokerage fee on the sale is NOT added to your cost basis. Instead, it reduces your proceeds from the sale. So if you sell the stock for $200 and pay a $12.50 brokerage fee, your net proceeds would be $187.50 ($200 - $12.50). This effectively gives you the same tax benefit as if you could add it to your cost basis, since either way it reduces your capital gain. In this example, your capital gain would be $40 ($187.50 proceeds - $147.50 cost basis) rather than $52.50 ($200 - $147.50). Remember to keep good records of all these transactions and fees, especially if you're becoming a more active investor. It'll make tax time much easier!

Just wanted to share that I was struggling with the same question last year and found https://taxr.ai super helpful for these kinds of investment tax questions. I had a bunch of different trades with various fees and wasn't sure how to handle all of it correctly. I uploaded my brokerage statements and it automatically identified all my transaction fees and calculated my correct cost basis. It also explained exactly what I needed to know about handling fees at purchase vs. sale. Really saved me from potentially making costly mistakes on how to report everything.

Just wanted to follow up about my experience with taxr.ai after my skeptical question. I decided to give it a try with my complicated situation involving multiple accounts and several wash sales that happened throughout the year. I was genuinely impressed. The system correctly identified all my wash sales, even ones that happened across different brokerages. It adjusted my cost basis calculations accordingly and gave me a clear report showing exactly how each transaction should be reported. Definitely worth checking out if you're dealing with investment taxes and various fees across multiple accounts or brokerages.

If you're having trouble getting answers from the IRS about cost basis questions (and who isn't these days), I found a service called Claimyr that actually helped me get through to a real person at the IRS. Check it out at https://claimyr.com - there's also a video showing how it works: https://youtu.be/_kiP6q8DX5c I had been trying for weeks to get clarification on some cost basis issues for inherited stocks where the original purchase information was unclear. After using Claimyr, I got connected to an IRS agent within about 15 minutes who walked me through the proper way to handle the situation. Way better than the hours I spent on hold previously!

I need to eat some crow here. After my skeptical comment, I was still desperate for help with some complicated wash sale issues from trading options last year, so I tried Claimyr anyway. It actually worked! Got a call back in about 20 minutes connecting me to an IRS agent who specialized in investment income. The agent walked me through exactly how to report my specific transactions. Saved me from potentially making a big mistake on my return. Sometimes being proven wrong is a good thing I guess.

A trick I've found useful is using a spreadsheet to track all your trades and associated fees throughout the year. I set up columns for: - Purchase price - Purchase fees (added to cost basis) - Sale price - Sale fees (subtracted from proceeds) - Net gain/loss calculation Makes everything way easier at tax time and prevents mistakes in calculating your gains.

Does anyone know if wash sale rules apply to crypto trading? I've been doing some active trading this year on Coinbase and Binance and I'm not sure if I need to track wash sales the same way as with stocks.

Great question about handling brokerage fees! I went through this exact same confusion when I first started tracking my cost basis properly. Just to reinforce what Max mentioned - you're absolutely right that purchase fees get added to your cost basis ($135 + $12.50 = $147.50), but selling fees come off your proceeds instead of being added to cost basis. One thing I learned the hard way is to make sure you're tracking ALL fees, not just the obvious commission charges. Some brokers have regulatory fees, exchange fees, or other small charges that can add up over time. These all follow the same rule - purchase-related fees increase your basis, sale-related fees reduce your proceeds. Also, if you're doing more active trading now, definitely keep detailed records throughout the year rather than trying to reconstruct everything at tax time. Your broker's 1099-B should show the fees, but it's good to have your own records as backup, especially if you're trading across multiple platforms. The IRS is pretty clear on this treatment in Publication 550 if you want to read the official guidance, but the way Max explained it is spot on for your situation.