HIFO vs FIFO for crypto taxes

HIFO and FIFO are two ways of deciding which crypto units you sold when you bought the same coin at different prices. The choice changes the cost basis matched to each sale, and so the size of the gain or loss. In the US, FIFO is the fallback rule, while HIFO, LIFO and similar methods are ways of applying specific identification.

How does FIFO crypto tax work?

FIFO assumes the units you have held longest are the ones you sold. The IRS applies it by default when you do not validly identify units, using the earliest acquisition date within each wallet or account.

An example: you bought one bitcoin at $20,000, then one at $60,000, then one at $40,000. You sell one for $50,000. Under FIFO the $20,000 unit is sold, giving a $30,000 gain. Because the oldest units go first, FIFO also tends to produce long-term holding periods. The basics of basis are in what is crypto cost basis.

How do HIFO crypto taxes and specific identification work?

HIFO treats the highest-cost units as sold first. In the example above, the $60,000 unit is matched to the sale, giving a $10,000 loss instead of a gain. The trade-off is that the costliest units are often the newest, so a HIFO sale can be short-term, which is taxed at ordinary income rates.

The IRS has no rule named HIFO. It allows specific identification, meaning you choose the units. For a self-custody wallet, you must identify them no later than the sale and keep records. For crypto held with a broker after 2025, you identify units with the broker using its own process, and a standing order must be in place by the time of the trade. If a broker offers only one method, the IRS treats that method as your standing order. A platform setting such as HIFO is one way of recording that choice. Losses this creates are covered in crypto losses and taxes.

What cost basis method does Coinbase use?

Coinbase's help page lets customers choose HIFO, LIFO or FIFO under Taxes, then Settings, on web or in the app. The first time, you confirm the method used for previous years, with an option labelled "Keep HIFO method for all years". Coinbase warns that once you confirm your historical method, you cannot change it again. The method then chosen applies to future transactions. How Coinbase reports sales is covered in does Coinbase report to the IRS.

What is the difference between FIFO and LIFO for crypto?

LIFO (last in, first out) treats the most recently bought units as sold first. In the example, that is the $40,000 unit, for a $10,000 gain. Coinbase's tax glossary describes all four methods and notes FIFO is the IRS default when records are missing.

None of these choices exist in the UK. HMRC pools each token type in a section 104 pool with one averaged cost, after applying same-day and 30-day matching rules, as explained in how crypto is taxed in the UK.

Rules differ by country and change often. Check the tax authority or a qualified professional for your own situation.