FIFO (First In, First Out): what it means for crypto tax

FIFO is a cost basis method that assumes the earliest coins you bought are the first ones you sell. It is the most widely accepted default and often produces a larger gain in a rising market, since the oldest, cheapest lots are used first.

General information, not tax advice. Crypto tax rules differ by country and change over time, verify against your country's guidance or a qualified advisor.

An example

You bought 1 ETH at 1,000 then another at 2,000. Selling 1 ETH under FIFO uses the 1,000 lot, so your basis is 1,000.

Why it matters for your tax

The method decides which basis is matched to a sale, and so the size of the gain. FIFO is accepted almost everywhere, which is why it is the common default.

CryptaTax handles this automatically across your wallets and exchanges, so the concept is applied consistently without you tracking it by hand. Try the crypto tax calculator →

Related terms

• Cost basis method
• LIFO
• HIFO

See the full crypto tax glossary for every term, or the crypto tax guides for how they fit together.

FIFO (First In, First Out): what it means for crypto tax

Definition in context

FIFO is a cost basis method that assumes the earliest coins you bought are the first ones you sell. It is the most widely accepted default and often produces a larger gain in a rising market, since the oldest, cheapest lots are used first.

Why it matters to crypto records

When you sell or exchange crypto, you must calculate the gain or loss. FIFO determines which purchase price to match with the sale. Because crypto prices can be volatile, the choice of method can significantly affect your taxable income. FIFO is simple and often required by default, but it can lead to higher taxes in a bull market. Keeping accurate records of each acquisition (date, amount, cost) is essential to apply FIFO correctly.

Record example

You buy 1 ETH on Jan 1 for $1,000 and another 1 ETH on Mar 1 for $2,000. On Jun 1, you sell 1 ETH for $3,000. Under FIFO, you use the Jan 1 lot (cost $1,000) as the cost basis, so your gain is $2,000. If you had used the Mar 1 lot, the gain would be $1,000. The difference is $1,000 in taxable gain.

Distinctions and next steps

FIFO contrasts with LIFO (Last In, First Out) and HIFO (Highest In, First Out). LIFO uses the most recent purchases first, while HIFO uses the highest-cost lots. FIFO is often the default in many jurisdictions, but you may be able to choose another method if you keep detailed records. To apply FIFO, you need to track each acquisition separately. Consider using crypto tax software that supports FIFO and can generate reports for your tax return.

A FIFO workpaper begins with a complete chronological acquisition list. For each lot, retain the date, quantity, source, cost record and any movement that carried the lot between wallets or exchanges. Reconcile duplicate imports before ordering the lots; otherwise an early duplicate can change every later selection. At a disposal, preserve the list as it stood at that point, the quantity selected and the remaining balance of each lot. The record is valuable even where a different method applies, because it shows the underlying history rather than only the final calculation.

A careful next step

Before acting on this term, return to the original record and write down the question it raises: what changed, which source proves it, and whether another related concept describes the event more accurately. Keep that note with the export or wallet evidence. It makes a later review faster and avoids turning a short label into an unsupported conclusion about tax, accounting or reporting.