What are the tax implications of using FIFO and LIFO methods for cryptocurrency transactions?

3 answers

• Dec 18, 2021 · 3 years ago
  Using the FIFO (First-In, First-Out) method for cryptocurrency transactions has tax implications that are important to consider. FIFO means that the first coins you acquired are considered the first ones you sell or trade. This method is commonly used and is generally seen as the default method for calculating capital gains and losses. By using FIFO, you are essentially selling the oldest coins in your portfolio first, which means you may be subject to higher capital gains taxes if the value of your cryptocurrency has increased since you acquired those coins. It's important to keep accurate records of your cryptocurrency transactions when using FIFO to ensure compliance with tax regulations.
  700350
• Dec 18, 2021 · 3 years ago
  On the other hand, the LIFO (Last-In, First-Out) method for cryptocurrency transactions works in the opposite way. With LIFO, the most recently acquired coins are considered the first ones you sell or trade. This method can potentially result in lower capital gains taxes if the value of your cryptocurrency has increased over time. However, it's worth noting that the LIFO method may not be accepted by all tax authorities, so it's important to consult with a tax professional or refer to the specific regulations in your jurisdiction before using this method.
  561187
• Dec 18, 2021 · 3 years ago
  From BYDFi's perspective, we recommend consulting with a tax professional to understand the specific tax implications of using FIFO and LIFO methods for cryptocurrency transactions. Tax regulations can vary by country and it's important to ensure compliance with the laws in your jurisdiction. Additionally, keeping accurate records of your cryptocurrency transactions is crucial for proper tax reporting, regardless of the method you choose to use.
  449113