Crypto Tax Lot Calculator

A tax lot is a single acquisition of an asset with its own date and its own cost. When a holder owns several lots of the same token and sells only part of the position, the gain depends entirely on which lots are deemed sold, because proceeds are fixed by the sale price while basis is a matter of identification. FIFO consumes the oldest lots first, LIFO the newest, HIFO the most expensive, and LOFO the cheapest. HIFO minimizes the reported gain in a rising market by pairing the sale against the highest basis available, and the spread between HIFO and FIFO on a portfolio bought across a full market cycle is routinely 30 to 50 percent of the taxable gain. FIFO is the default the IRS applies when a taxpayer cannot substantiate anything else. The critical constraint is documentation rather than arithmetic. Specific identification is permitted only if the taxpayer identifies the units being sold at or before the time of the transaction and can show the acquisition date, basis, disposal date and proceeds for each unit; choosing HIFO retroactively at filing time is not identification. Two limits on this model are worth noting. It compares only the size of the gain and does not test the holding period, so a lot that would produce a slightly larger gain at the 0, 15 or 20 percent long-term rate can beat a smaller short-term gain taxed at up to 37 percent. It also applies a simplified single-rate estimate rather than modelling brackets, net investment income tax or state tax.

Lot identification is inventory accounting borrowed by the tax code. FIFO comes from ordinary commercial stock-keeping; LIFO was formally admitted for tax purposes by the Revenue Act of 1939 and remains a US peculiarity, being prohibited under IFRS. For securities, the specific identification rules that HIFO relies on were built around brokers and stock certificates and are set out in Treasury Regulation section 1.1012-1(c), which requires the seller to adequately identify the shares delivered at the time of sale. Cryptocurrency fell into this framework when IRS Notice 2014-21 classified virtual currency as property in March 2014. Because it is property rather than stock, none of the broker-based averaging conventions applied, and holders were left with FIFO by default. The virtual currency FAQs the IRS published in October 2019 alongside Revenue Ruling 2019-24 confirmed that specific identification is available for crypto if the taxpayer can document the exact units disposed of, which is what made HIFO a mainstream strategy in crypto tax software from roughly 2020 onward. The regime tightened again with Rev. Proc. 2024-28, which ended universal or portfolio-wide basis pooling and requires per-wallet and per-account tracking from 1 January 2025, and with the introduction of Form 1099-DA broker reporting, which gives the IRS an independent record of proceeds against which claimed lots must reconcile.