Let’s say you purchased one Bitcoin 14 months ago for $15,000 and another Bitcoin six months later for $40,000. Today, you sell one Bitcoin for $60,000. You’re a genius!

But is your taxable gain

$45,000 ($60,000 – $15,000), or

$20,000 ($60,000 – 40,000)?

It depends on your crypto accounting method.

It’s up to you to choose the method you use to calculate crypto gains and losses. At a time of surging cryptocurrency prices, the method you use can have a big impact on the amount of your taxable gains.

FIFO: The Default Method

FIFO (first in, first out) is the default method of crypto accounting. It must be used if you don’t specify another method.

With this method, crypto units are deemed to have been sold, exchanged, or otherwise disposed of in chronological order beginning with the earliest unit you purchased or acquired—that is, on a first-in, first-out basis.1

Example. You bought one Bitcoin on January 1, 2022, for $15,000. ... Log in to view full article.