FIFO vs LIFO crypto: which cost basis method?

How FIFO, LIFO and HIFO affect what you pay on crypto gains

When people talk about FIFO vs LIFO crypto, they're asking which coins you’re considered to have sold for tax. FIFO (first in, first out) says your earliest coins get sold first. LIFO (last in, first out) means your latest ones leave first. HIFO (highest in, first out) goes by price: it uses up the coins you paid the most for. Cost basis, the actual figure used for tax, is what you paid, plus things like trading fees or brokerage charges.

Let’s say you bought a coin a few times, at different prices. The way you pick which one is sold will change your profit or loss for that sale, even if your sale price is fixed. This is why some countries require a certain method. Others give some freedom, as long as you follow their rules for records.

Rules in your country: why you need to be sure

Depending on where you live, you might have to use FIFO or another approach. If you’re in the US, average cost pooling is not the standard, but in some other countries it is. For example, you’ll see details in our article on average cost basis and pooling methods. If you’re using specific identification in the United States, you need records showing exactly which units you sold, otherwise, tax law usually means you fall back to FIFO. The safest option is to check what your tax office allows for your situation.

Stick with one method for the whole tax year. Changing part way because it seems cheaper isn’t something tax authorities look kindly on. They often ask for evidence if a method changes just when a bigger bill is due.

Matching sales to purchases: how specific ID and lots work

With specific identification, you say exactly which purchase your sale came from, perhaps picking the coins bought for the highest price that are still on hand. To back this up, you’ll need every transaction date, the number of units, your home currency value, and where you kept them (account or wallet).

No records to prove it? The tax office may insist you report under their default, commonly FIFO, no matter what you wanted to use.

A concrete case: different methods, different tax

Here’s an example. Buy one unit at 100. Later, buy one at 200. Then sell one for 300. Under FIFO, your cost basis is 100, so your reportable gain is 200. With LIFO or HIFO, both use the 200 purchase, as it’s either most recent or highest, and the reported gain is only 100.

Your sale always brings in 300, but the coins you match it to decide your cost figure. That’s why the cost basis method makes a real difference to how much you pay, and when.

Frequently asked questions

Which crypto cost basis method is best?

There isn't a single best choice for everyone. The right approach is whichever option your local tax rules allow, followed all year, and only if you keep detailed records. Picking a method that cuts your tax now might cost you later, so choices are best discussed with a qualified tax adviser ahead of any big sale, especially given how crypto values can swing suddenly.

What is specific identification in crypto tax?

Specific identification is a method where you match your sales to particular coins or tokens you bought, as shown by your records, each with dates, unit prices and transfer info. This can mean you get a lower tax bill if higher-cost coins are chosen, though using it depends on local rules and how well you track every batch. Make sure you check your country’s requirements or ask your accountant.