By MoneySense Editors on June 17, 2022

What is an adjusted cost base (ACB)?

By MoneySense Editors on June 17, 2022

What is an adjusted cost base (ACB)? Why do you need to know this definition? The MoneySense Glossary is your resource for learning and understanding financial terms

The adjusted cost base (ACB) of an investment is the cost used to calculate your capital gain or capital loss for tax purposes. ACB represents the total cost of the security, including commissions and certain other costs. For example, if you buy 10 shares of a $20 stock for $200 and pay a $19 commission, your ACB is $219. For real estate such as secondary residences or rental income properties, the ACB can include expenses like maintenance, property taxes, property manager fees, etc.

ACB = Investment-related costs + cost of the investment

Calculating your adjusted cost base is more complicated for shares acquired through dividend reinvestment plans (DRIPs) or corporate actions like stock splits. These occurrences change your ACB for a stock, so you’ll need to keep track of the timing, the number of shares and the value of each transaction.

Example: “Because the Canada Revenue Agency requires taxpayers to report in Canadian dollars, investors who trade in U.S. or other foreign-denominated securities should keep track of their adjusted cost base in Canadian dollars on the date of each transaction.”

Read more on ACB:

Calculating expected returns on the sale of real estate
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Calculating adjusted cost base: A case study
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Calculating your adjusted cost base with ETFs
Being a DIY investor is easy when all your accounts are tax-deferred. As the April 30 tax deadline approaches, pretty much all you need to do is gather your RRSP contribution slips. But if you have non-registered accounts, things are more complicated, even if you’re a Couch Potato who uses ETFs and index funds.