How to properly handle brokerage fees in stock cost basis calculations for tax reporting

Thanks for explaining! So I've been thinking about it wrong the whole time. If I follow your example, I'm essentially: 1) Adding purchase commission to cost basis 2) Subtracting selling commission from proceeds Does this also apply to other fees my broker charges? I sometimes see regulatory fees or exchange fees on my statements.

Yes, you've got it exactly right! You add purchase fees to your cost basis and subtract selling fees from your proceeds. Regarding those other small fees like regulatory fees or exchange fees, those can generally be treated the same way as commissions. So regulatory fees paid when purchasing would be added to your cost basis, and those paid when selling would reduce your proceeds. The key is that they must be necessary expenses directly connected to the specific transactions.

Does it work with statements from Robinhood and Fidelity? I have accounts at both and honestly, Robinhood doesn't make it easy to see the fees they're embedding.

Sounds interesting but I'm skeptical. How does it handle FIFO vs specific identification methods for multiple purchases of the same stock? I'm dealing with partial sales of positions I built over time and it's a nightmare to track.

It works perfectly with both Robinhood and Fidelity! I had the same issue with Robinhood's hidden fees, but the tool extracted them correctly. It actually helped me discover some payment-for-order-flow adjustments I would have missed. For FIFO vs specific identification, it actually gives you the option to choose your method and will recalculate everything based on your selection. You can even model different scenarios to see which method gives you the best tax outcome. It's super helpful for those partial sales of positions built over time - that's exactly what I was dealing with too.

Wait, how does that even work? The IRS phone system is notoriously awful. Is this just paying someone to wait on hold for you or something?

Yeah right. I'll believe this when I see it. I've literally spent HOURS on hold with the IRS and still got disconnected. No way they're getting anyone through in 15 minutes unless they have some secret backdoor number that regular people don't have access to.

It essentially uses technology to navigate the IRS phone system more efficiently than a regular caller could. It's not a secret backdoor - they're calling the same numbers we all have access to, but their system monitors wait times across different IRS departments and knows exactly when to call to minimize wait time. No, it's not just paying someone to wait on hold. It's a system that secures your place in line and then calls you when an agent is about to be available. I was skeptical too, but it worked exactly as advertised - I got connected to someone in the capital gains department who knew exactly how to handle my cost basis questions.

I tried that with TurboTax but had issues because my broker (smaller regional one) isn't on their direct import list. Do you know if there's a way to format an Excel file in a way these tax programs can read for multiple transactions?

Yes! Most tax software can import a CSV file with your transactions. You'll need to format it with specific columns though. For TurboTax, they have a template you can download from their import screen - look for "Import from Excel/CSV" option when you get to the investment income section. H&R Block and TaxAct have similar features. The key fields you'll need are usually: security name, purchase date, cost basis, sale date, sale proceeds, and whether it's short-term or long-term. Make sure your commission amounts are already factored into your cost basis and proceeds as we discussed above before importing.

Could you share more about the crypto fee rules? I started mining and trading last year and have no idea how to handle all the gas fees and exchange fees.

For crypto, the basic principle is similar to stocks but there are some key differences. Gas fees and exchange fees when buying crypto get added to your cost basis, and fees when selling reduce your proceeds - just like with stock commissions. But here's where it gets tricky: mining rewards are taxable income at fair market value when received, and any fees you paid to mine (like pool fees) are deductible business expenses. Also, if you're doing DeFi transactions, each swap/trade is a taxable event even if you never convert back to USD. The IRS has been pretty clear that every crypto transaction needs to be reported. I'd recommend keeping detailed records of all your transactions including gas fees, exchange fees, and mining pool fees. There are some crypto tax software options like Koinly or CoinTracker that can help parse through all those transactions if you have a lot of them.

This is really helpful, especially the tip about transfer fees! I hadn't thought about those being added to cost basis. I actually transferred some positions from Robinhood to Fidelity last year and paid a $75 ACAT fee. So if I understand correctly, that $75 would get added to the cost basis of those transferred shares? Also, you mentioned "trader in securities" status - what's the threshold for that? I made about 200 trades last year but I have a day job, so I'm not sure if that would qualify me or if it would even be beneficial.

Yes, exactly! That $75 ACAT transfer fee would be added to the cost basis of the transferred shares. The IRS treats transfer fees as part of your acquisition costs since they're necessary expenses to obtain the securities. Regarding trader status, it's not just about number of trades - the IRS looks at four main factors: 1) frequency and regularity of trades, 2) whether trading is your primary income source, 3) time devoted to trading, and 4) whether you're seeking short-term profits. Since you have a day job, you'd probably be classified as an investor rather than a trader, which is actually fine - most people don't benefit from trader status anyway because you lose the ability to claim capital gains treatment (everything becomes ordinary income/loss). With 200 trades and a day job, you're likely better off staying with investor status and just making sure you're properly tracking all those commission adjustments!