Ask Doug

How Do I Calculate Capital Gains for DRIPs?

Q. How will I calculate the capital gains on my DRIPs in the future? It seems like the record keeping will be a nightmare.

Tax FormA. Yes, recordkeeping can be a problem with DRIP investing. Each reinvested dividends is considered an additional purchase and a separate tax lot when you're calculating your tax liability.

A money management software program like Quicken, Microsoft Money, or Investment Account Manager (my personal favorite) is a very good idea to keep track of all your DRIP transactions.