Understanding Tax Lot Relief Methods in the Tax Center

Last updated: 16 มี.ค. 2569

We apologize for any delays in the delivery of Form 1099-DA. We are issuing forms as quickly as our processes allow and have experienced technical challenges.  Many clients have received Forms 1099-DA and 1099-MISC, and forms are continuing to be generated and will populate in the Tax Center as they are available. If you have not received a Form 1099-DA, you should receive it within the coming days as systems are generating the forms. Please note that you will not receive a Form 1099-DA or Form 1099-MISC if your account activity does not meet the IRS reporting thresholds for those forms (and you will receive an e-mail if you are in this group within the next couple days). Regardless of whether you are slated to receive a Form 1099, your transaction data will show up in the Tax Center and we again encourage you to leverage this data as it is the same underlying data being used to generate the Forms 1099-DA and 1099-MISC.

The Tax Center, powered by Cointracker, allows you to select a tax lot relief method, which determines how your digital asset transactions are treated for tax reporting purposes. Your selected method affects how gains and losses are calculated when you sell, convert, or otherwise dispose of crypto.

This article explains the tax lot relief methods available in the Tax Center and how they work.

A tax lot relief method determines which units of a digital asset are considered sold first when a taxable event occurs.

Because digital assets are often acquired at different times and prices, the method you select can impact:

  • Your reported capital gains or losses

  • The timing and amount of taxable income

The Tax Center supports the following tax lot relief methods:

  • FIFO (First-In, First-Out) – Default

  • LIFO (Last-In, First-Out)

  • HIFO (Highest-In, First-Out)

  • LOFO (Lowest-In, First-Out)

You can review and update your selected method in the Tax Center settings.

FIFO assumes that the oldest assets you acquired are sold first.

How FIFO works?

  • The first units you purchased are treated as the first units sold.

  • This is the default tax lot relief method in the Tax Center.

Things to consider

  • FIFO is commonly used and widely recognized.

  • In rising markets, FIFO may result in higher taxable gains if older assets were acquired at lower prices.

LIFO assumes that the most recently acquired assets are sold first.

How LIFO works?

  • The most recent units you purchased are treated as the first units sold.

Things to consider

  • LIFO may reduce taxable gains in some market conditions if recent purchases were made at higher prices.

  • Tax outcomes may differ from FIFO depending on market movements and holding periods.

HIFO assumes that the assets with the highest cost basis are sold first, regardless of when they were acquired.

How HIFO works?

  • For each taxable transaction, the units with the highest purchase price are selected first.

Things to consider

  • HIFO may reduce taxable gains by prioritizing higher-cost assets.

  • Results can vary by transaction and may be more complex than FIFO or LIFO.

LOFO assumes that the assets with the lowest cost basis are sold first, regardless of when they were acquired.

How LOFO works?

  • For each taxable transaction, the units with the lowest purchase price are selected first.

Things to consider

  • LOFO may result in higher taxable gains, as lower-cost assets are disposed of first.

  • Some users may prefer LOFO for specific tax planning or reporting strategies.

  • Outcomes can vary significantly depending on price history and transaction patterns.

  • Changes apply prospectively only.

  • Any updates will apply to transactions occurring on or after January 1, 2026.

  • Changes do not affect transactions from prior tax years.

To update your tax lot relief method:

  1. Access the Tax Center using a desktop device

  2. Navigate to the Settings section of the tax center

  3. Select your preferred tax lot relief method

Your selection will be applied according to the effective date rules described above.

The Tax Center provides tools to help you review and manage tax-related information associated with your account. It does not provide tax advice. Tax treatment of digital assets may vary based on your individual circumstances and jurisdiction.  If you have questions about which method is appropriate for you, consider consulting a qualified tax professional.

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