Stock Trading Terms Glossary: Cost Basis, Wash Sale, NIIT & More

July 19, 2026

Stock profit and capital gains calculations pull in several IRS-specific terms that don’t come up anywhere else in everyday finance. Here’s what they mean, in the order they usually matter when using the stock profit calculator.

Cost Basis

The total amount originally paid for shares — Buy Price × Shares Bought — plus certain adjustments like reinvested dividends or brokerage fees paid on the purchase. Every profit, loss, and return percentage calculation is measured against this number. IRS Publication 550 covers the full rules for what can and can’t be added to basis.

Return Percentage

Profit or loss expressed as a percentage of cost basis rather than a raw dollar figure — the number that lets a $500 gain on a $1,000 investment (50%) be fairly compared against a $500 gain on a $50,000 investment (1%).

Break-Even Price

The exact sell price per share at which total proceeds equal cost basis plus fees, after crediting any dividends already received. See the stock profit calculator for the full formula.

FIFO (First In, First Out)

The IRS’s default cost basis method when multiple purchases (lots) of the same stock were made at different times and prices — the earliest-purchased shares are treated as the ones sold first, unless the investor specifically identifies otherwise. See multiple buy lots & cost basis methods for how this changes a profit calculation.

Specific Identification

An alternative to FIFO where the investor specifically tells the broker which purchase lot (by original trade date and price) is being sold, rather than automatically defaulting to the oldest shares. This requires advance notice to the broker at the time of the trade and is commonly used to control which lot’s gain or loss gets realized.

Short-Term vs. Long-Term Capital Gains

A stock held one year or less produces a short-term gain, taxed as ordinary income. Held more than one year, it becomes a long-term gain, typically taxed at the lower 0%/15%/20% federal capital gains rates depending on income. See the stock profit calculator for current bracket thresholds.

Wash Sale Rule

An IRS rule disallowing a loss deduction if the same or a “substantially identical” security is bought within 30 days before or after the sale that generated the loss. The disallowed loss isn’t gone forever — it gets added to the cost basis of the newly purchased shares instead, per IRS Publication 550. See tax-loss harvesting & the wash sale rule for how this affects a loss-harvesting strategy.

Capital Loss Carryover

If total capital losses in a year exceed total capital gains, up to $3,000 of the excess loss ($1,500 if married filing separately) can offset ordinary income on that year’s return, per IRS Topic 409 — and any loss beyond that carries forward to offset gains or income in future tax years indefinitely.

Net Investment Income Tax (NIIT)

An additional 3.8% federal tax that can apply to investment income — including capital gains — for higher-income taxpayers, on top of the regular capital gains rate. It phases in above modified adjusted gross income thresholds that are separate from the capital gains bracket thresholds themselves.

Using This Glossary

Match these terms against a brokerage 1099-B statement or trade confirmation, then enter the relevant buy price, sell price, shares, and fees into the stock profit calculator to get profit, return percentage, and break-even price. For calculation patterns that trip people up around these terms, see common stock profit calculation mistakes.