What is cost basis in crypto?

Cost basis is what you paid for the crypto you sold, including fees. Your capital gain is the sale proceeds minus that basis. Since you usually buy at many prices, the method you use to pick which purchase lots a sale draws from directly changes your gain and your tax.

Which cost basis method is best for crypto taxes?

There's no universal best. HIFO (highest-cost first) minimizes the gain on a given sale, which lowers tax now. FIFO (oldest first) is the IRS default and often realizes older, cheaper lots — a bigger gain, but one more likely to qualify for lower long-term rates. The right choice depends on your lots, your holding periods and the records you can support.

Can I use HIFO or LIFO for crypto in the US?

Generally only if you use specific identification and keep detailed records showing exactly which units you sold — date acquired, cost, date sold and proceeds. Without that documentation, the IRS default is FIFO. Rules and broker reporting are tightening, so confirm the current requirements before relying on a method.

Crypto Cost Basis: FIFO vs LIFO vs HIFO Explained (2026)

Guides · 8 min read · Updated June 2026

You bought Bitcoin five times at five different prices. Now you sell some. Which Bitcoin did you sell — the cheap 2023 coins or the expensive 2025 ones? You get to choose (within the rules), and that choice, called your cost basis method, can swing your tax bill by thousands. Here's how the three main methods work.

Cost basis, in one line

Cost basis is what you paid for the coins you sold. Your taxable gain is sale proceeds − cost basis. Because your coins were bought at different prices, the sale has to be matched to specific purchase lots — and the matching rule changes the basis.

FIFO, LIFO, HIFO

FIFO (first-in, first-out) sells your oldest coins first. It's the IRS default and needs no special election. It often pulls in older, cheaper lots — a larger gain, but frequently a long-term one taxed at the lower rate. LIFO (last-in, first-out) sells your newest coins first. HIFO (highest-in, first-out) sells your most expensive coins first, producing the smallest gain on that sale — the most tax-efficient for the current year. The catch: LIFO and HIFO generally require specific identification — records proving exactly which units you sold — or the IRS falls back to FIFO.

A quick worked example

Say you hold 0.5 BTC bought at $21,000 and 0.5 BTC bought at $52,000, and you sell 0.5 BTC at $60,000. Under FIFO you sell the $21,000 lot → a $19,500 gain. Under HIFO you sell the $52,000 lot → only a $4,000 gain. Same sale, very different tax — that's the whole point of choosing a method (and keeping the records to back it).

Let the calculator do the matching

Doing this by hand across dozens of buys is where mistakes happen. The free cost basis calculator takes your lots and a sale, applies FIFO, LIFO or HIFO, and returns your cost basis, gain, and the short-term vs long-term split. Feed that split into the crypto tax calculator to estimate the actual tax, and keep every buy and sell in the trading journal so your records can defend whichever method you use.

Match your lots in seconds. Use the free cost basis calculator (FIFO/LIFO/HIFO), then the tax calculator for the bill. General information, not tax advice.

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Crypto Cost Basis: FIFO vs LIFO vs HIFO Explained (2026)

Cost basis, in one line

FIFO, LIFO, HIFO

A quick worked example

Let the calculator do the matching

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