Cost Basis Calculation is the process of determining the original value of an asset for tax purposes. It’s important to calculate a cost basis accurately, because it’ll directly affect any gains or losses when the asset is sold. Put simply, it helps determine what part of the sale proceeds constitutes taxable income. To figure out the cost basis for an asset, you need to add up your purchase price plus any associated costs such as commissions and taxes. Using this information, you can then apply depreciation rules and other adjustments to arrive at the final cost basis calculation. All of this will help you make informed decisions by understanding how different assets are taxed.