FIFO vs LIFO vs HIFO for Crypto — 2026
Which lot-matching method you pick can move your tax bill by thousands of dollars. Here's how each works, with a worked example showing exactly how much you save — and the documentation you need to make your chosen method stick with the IRS.
TL;DR
- FIFO — simplest, IRS default. Oldest lot sold first. Usually highest tax in a rising market.
- LIFO — newest lot sold first. Middle-ground. Not allowed in every country.
- HIFO — highest-cost lot sold first. Lowest current-year tax. Requires specific-ID documentation.
Worked example — $4,200 tax saving
You bought 3 BTC across three years:
- 1 BTC in January 2022 at $40,000
- 1 BTC in June 2022 at $22,000
- 1 BTC in January 2023 at $18,000
You sell 1 BTC in December 2024 at $45,000. Single filer, $120,000 ordinary income.
In this example FIFO and HIFO tied because the oldest lot was coincidentally the highest-cost. If you reverse the purchase order:
- 1 BTC in Jan 2022 at $18,000
- 1 BTC in June 2022 at $22,000
- 1 BTC in Jan 2023 at $40,000
$3,300 difference on a single BTC sale. Across a portfolio with hundreds of trades, method choice can move your tax bill by tens of thousands of dollars.
Country-by-country: which methods are allowed?
| Country | Default | FIFO | LIFO | HIFO | Other |
|---|---|---|---|---|---|
| 🇺🇸 United States | FIFO | ✅ | ✅ | ✅ (Specific ID required) | — |
| 🇬🇧 United Kingdom | Section 104 | — | — | — | Same-day + 30-day + pool |
| 🇩🇪 Germany | FIFO per wallet | ✅ only | ❌ | ❌ | Mandatory FIFO |
| 🇨🇦 Canada | ACB | — | — | — | Adjusted Cost Base averaging |
| 🇦🇺 Australia | FIFO | ✅ | ✅ | ✅ (Specific ID) | Specific-ID flexible |
| 🇫🇷 France | Weighted average | — | — | — | Proportional method |
| 🇳🇱 Netherlands | Box 3 wealth | — | — | — | Fictitious yield, not realised gains |
The documentation you need for HIFO in the US
HIFO isn't technically a separate method — it's Specific Identification where you happen to pick the highest-cost lot. IRS Reg. 1.1012-1(c) requires that you:
- Identify the specific units you're selling at the time of sale
- Have records showing acquisition date, acquisition price and quantity of those units
- Confirm the identification in writing (the exchange's transaction record works)
Most crypto tax software, including Koinly and CoinLedger, generates a "specific-identification report" that satisfies these requirements. If you're doing it manually, a spreadsheet documenting which lot you identified at each sale is acceptable evidence.
How tax software actually applies your chosen method
Both Koinly and CoinLedger let you pick a method per tax year in settings. The software then simulates the chosen method across all your transactions and recalculates gains/losses.
Pro tip: run the same year through both FIFO and HIFO before filing. If HIFO saves more than a few hundred dollars, the effort to document specific identification is worth it. If the numbers are within $100, use FIFO and skip the paperwork.
When FIFO is actually better than HIFO
- Short-term vs long-term matters more than cost basis. If FIFO sells a long-term lot at 15% but HIFO sells a short-term lot at 32%, FIFO wins despite higher apparent gain.
- You want to harvest losses. HIFO minimises gains today but preserves losing lots for later harvesting. FIFO may burn the loss this year.
- You're near a bracket boundary. Sometimes paying a bit more now at 15% long-term avoids pushing future income into the 24% bracket.
Next step: calculate your own tax
Use our free country-specific calculators to estimate the tax on a single trade under each method — takes 60 seconds.