When it comes to understanding taxes on investments, the concept of cost basis plays a pivotal role. Cost basis refers to the original value of an asset, and it acts as the foundation for determining capital gains or losses when the asset is sold. In this article, we delve into the significance of cost basis and how it influences the calculation of your tax burden. The cost basis is the initial value of an investment or asset, typically used to calculate capital gains or losses. It includes not only the purchase price of the asset but also any associated transaction costs, such as brokerage fees or commissions. The cost basis serves as a reference point to assess the change in value since the asset was acquired. When you sell an asset, whether it’s stocks, real estate, or other investments, you might experience a capital gain or loss. A capital gain occurs when the selling price is higher than the asset’s cost basis. Conversely, a capital loss arises when the selling price is lower than the cost basis. The determination of your tax burden hinges on