Your cost basis method determines which assets are sold first, and different methods can affect how much you owe in taxes.
When you buy the same cryptocurrency at different times, you create multiple cost basis lots for that asset. When you trade or sell that crypto, your profit or loss depends on which of these cost basis lots is used in the sale.
Transactions from 2025 onward
Starting January 1, 2025, the only accepted cost basis methods for digital assets will be First-In-First-Out (FIFO) and Specific Identification.
For Specific Identification, you must identify the asset(s) at or before the time of the sale, meaning you can no longer apply it retroactively. The method will depend on whether you’re:
- Reporting transactions from centralized exchanges or DeFi transactions, and
- the method(s) allowed by the exchanges you trade on.
Centralized exchanges will soon be required to track cost basis for their customers, as they will soon have to issue Forms 1099-DAs. While they may support Specific Identification, they are not required to. CoinTracker will allow users to set their cost basis method by exchange and wallet to match the method used by the broker.
Transactions before 2025
For transactions before 2025, the IRS allowed the use of both FIFO and Specific Identification methods, and you could apply them retroactively at the end of the tax year when generating your reports.
While Specific Identification helps you track exactly which asset is being sold, not all platforms—including CoinTracker—offer this option at the individual unit level. However, we do support alternatives like HIFO (highest in, first out) and LIFO (last in, first out), which are subsets of Specific Identification.
Learn more about cost basis and read about what our tax experts say about what the best cost basis methods are for you.
Cost basis calculation options
FIFO (First In, First Out)
- Definition: Assets are sold in the order they were acquired.
- Benefit: The simplest and most conservative method, this is the default method under the new IRS regulations if Specific ID is not used.
Specific ID
- Definition: Allows the identification of the exact coin being sold at the time of transaction, whether ad-hoc or according to a pattern like HIFO or LIFO.
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IRS Requirements:
- Before 2025: Records must match Specific ID criteria.
- After 2025: The asset(s) sold must be identified prior to the time of the sale or transfer.
CoinTracker supports HIFO and LIFO under Specific ID but does not offer unit-by-unit identification. If you would like to request this feature, please upvote this post on our feedback forum.
HIFO (Highest In, First Out)
- Definition: Assets bought at the highest price are sold first.
- Benefit: Minimizes taxable gains by selling the most expensive assets first.
Note: CoinTracker defaults all wallets to HIFO, as it tends to lower the tax bill.
LIFO (Last In, First Out)
- Definition: Most recently purchased assets are sold first.
- Benefit: Useful in certain tax scenarios by selling assets with higher recent purchase.
Change your cost basis method
You can change your cost basis method from the Settings page. Changing your cost basis method will apply to all years unless you have an Ultra plan, which will allow you to set a different method for each tax year.
Learn more about setting the cost basis method by tax year. For personalized advice on which method aligns best with your preferences or regulatory requirements, consult a tax professional.
CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.