Miles Brooks holds his Master's of Tax, is a Certified Public Accountant, and is the Director of Tax Strategy at CoinLedger.
Head of Tax Strategy
Jordan Bass is the Head of Tax Strategy at CoinLedger, a certified public accountant, and a tax attorney specializing in digital assets.
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If you’ve bought your cryptocurrency at multiple price points, you’ll need an accounting/cost basis method to determine your capital gain/loss.
Accounting methods determine the order in which you sell your cryptocurrency — which can have a big impact on your tax bill!
While FIFO is considered the default accounting method, methods like HIFO can help you save money on your taxes.
Frequently asked questions
Can I use HIFO for crypto?
Yes. The IRS’s guidance states that crypto investors can use HIFO provided that they keep detailed records and can identify specific units of cryptocurrency.
Can I change calculation methods from year to year?
Yes. IRS guidelines allow investors to change calculation methods from year to year. However, taxpayers are required to keep detailed records of transactions and properly account for each sale.
What accounting method should I use for my crypto?
While American crypto investors can use accounting methods like FIFO, LIFO, and HIFO, many choose to use FIFO because it is considered the ‘default’ option.
Is HIFO better than FIFO?
The ‘best’ accounting method for cryptocurrency varies depending on the facts and circumstances of your situation. In most situations, HIFO can reduce your tax bill, but you’ll need detailed records of your transactions to be able to specifically identify the crypto you’re disposing of.
Does Coinbase use LIFO or FIFO?
Coinbase allows users to select their accounting method through their settings on their account. You can choose FIFO, HIFO, or LIFO.