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anneodeyne
New Member

When computing a cost basis on a dividend reinvestment plan, can I add in the amount of taxes I pay yearly on the dividends?

Trying to compute the cost basis on DRIP account in a taxable account.  I understand that the dividends are the cost basis but can I also add in the amount of taxes that I pay each year?  This would make my cost basis higher and thus less of a gain when I sell.

2 Replies
VolvoGirl
Level 15

When computing a cost basis on a dividend reinvestment plan, can I add in the amount of taxes I pay yearly on the dividends?

No.  And how would you calculate the tax just on the dividend amount?  The tax didn’t buy more shares.  You are adding the drip back in because it was a purchase of more shares.
Hal_Al
Level 15

When computing a cost basis on a dividend reinvestment plan, can I add in the amount of taxes I pay yearly on the dividends?

You paid tax on the dividends you reinvested. So, you get to count that dividend amount as your tax paid basis in the purchased shares. So, you have already received the tax benefit.
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