The Cost Basis Method (CBM) determines how non-option closing transactions choose which of your shares to sell, whether it's First in, First out or you use the Tax Lot Optimizer™ to have the software figure out the most beneficial cost basis configuration.
Within StreetSmart Edge®, you can set your cost basis method for individual orders from the Cost Basis Method column of the Order Status tab, or from the Special Conditions drop-down when placing an order.
To learn more about the cost basis methods available to you and how cost basis affects your tax circ*mstances, log on to Schwab.com and go to Guidance > Taxes > Cost Basis Reporting.
| Cost Basis Methods | |
|---|---|
| First in First out (FIFO) | Shares you acquired first are sold first. This is Schwab's default Cost Basis Method for equities, ETFs, and DRIPs. |
| Last in First out (LIFO) | Shares you acquired last are sold first |
| High Cost | Shares with the highest cost are sold first |
| Low Cost | Shares with the lowest cost are sold first |
| Tax Lot Optimizer™ | Lots are selected and sold with the objective of taking losses (short-term then long-term) and gains last (long-term then short term). Click here to see the order of sales for this method |
| Specified Lots | Manually select from a list of eligible lots which lots are sold at the time of trade up until the settlement date. Note that lots established today are not eligible for assignment. Either check All to assign an entire lot to be closed or enter a quantity. The Open Date and Hold Period columns can help you figure out the potential tax ramifications of closing a particular lot. |
TIP:IRS regulations allow you to change the cost basis method for your order up to midnight ET on settlement date. The change will update the cost basis method for all unsettled portions of your equity orders (including both open and filled transactions).
Account-level Cost Basis Method (CBM)
Set an Account-level CBM via Schwab.com by going to Service >Account Settings > Cost Basis Method and click the Change link). You can also link to the site by clicking the CBM: [method] link at the top of the Positions tab. Changes are effective the following day.
You can change CBMfor individual orders on Schwab.com as well, by going to Trade > Order Status and clicking the View/Edit link of the order you want to change, then click Change.
Notice you must log on to your account on Schwab.com to make these changes.
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