Crypto Taxes 101: Cost Basis Methods Explained
Learn FIFO, LIFO, HIFO, and Specific ID; what's taxable, what's not, and how to keep bulletproof records for filings.
Core Concepts
Taxable events
Sales, swaps, spending, interest/staking rewards, mining income, airdrops at receipt.
Non-taxable
Wallet-to-wallet transfers you control.
Cost basis methods
FIFO, LIFO, HIFO, Specific ID (needs detailed records).
Records to keep
Dates, amounts, tx hashes, fees, fair market value at time of disposition.
Cost Basis Methods
FIFO
First In, First Out - Use oldest coins first
LIFO
Last In, First Out - Use newest coins first
HIFO
Highest In, First Out - Use highest cost basis first
Specific ID
Choose specific coins - Requires detailed records
Practical Flow
Consolidate data from exchanges/wallets.
Tag transfers vs taxable events correctly.
Choose a cost-basis method permitted in your jurisdiction.
Generate reports; reconcile discrepancies.
Keep exports + backups for audit trails.
Note: Rules vary by country (e.g., CRA vs IRS). When in doubt, consult a licensed tax professional.
Frequently Asked Questions
Are swaps taxable?
Often yes—they're disposals into a new asset.
Wash sale rules?
Treatment can vary; check your jurisdiction.
Do I owe tax on staking rewards?
Frequently yes at receipt; confirm locally.