Cost basis is the original value of an asset, such as a stock or bond, for tax purposes. It’s important to know your cost basis when figuring out capital gains and losses come tax time. To calculate the cost basis of a stock investment, you must first add up all costs associated with obtaining the stock — purchase price, broker fees, commissions, etc. This total is then deducted from the proceeds of any sale, resulting in the net capital gain/loss that will be taxed. Knowing the cost basis of your investments can help ensure that you maximize their potential returns and pay only what you owe on them come tax season.