FIFO vs LIFO vs HIFO for Crypto

Three acronyms decide which acquisition lot a sale is matched against, and in a volatile market they can swing the same disposal between a large gain and a small one. FIFO takes the oldest lot, LIFO the newest, HIFO the most expensive. The catch is that two of them aren't methods you can simply switch on in the US: a HIFO or LIFO result exists only as an outcome of Specific Identification, with the records to back it. This article works through what each does to a gain using concrete numbers, then sets out where they actually apply. For which method your country mandates in the first place, start with the cost basis methods pillar; this is the mechanics layer beneath it.

The short answer

• FIFO sells the oldest lot, LIFO the newest, HIFO the highest-cost lot.
• In a rising market FIFO produces the largest gain this year and HIFO the smallest.
• In the US, the only recognised methods are FIFO and Specific Identification (Rev. Proc. 2024-28, per-wallet from 2025). HIFO and LIFO are not standalone elections — they happen only through a documented specific identification.
• The UK and France use pooling and the 150 VH bis portfolio formula, so FIFO/LIFO/HIFO are not the operative concepts there.
• A HIFO-style result is a timing shift, not free money: the low-cost lots stay in the holding and surface as a larger gain later.

What each does

They do not change proceeds or prices, only which acquisition cost is matched against the sale. The spread between them widens with volatility and a long holding history.

The US reality: two methods, not three

Under IRS Rev. Proc. 2024-28, the recognised methods are FIFO (the default) or Specific Identification, with per-wallet tracking from 2025. HIFO and LIFO are not separate blessed elections. A HIFO or LIFO outcome is only achievable through a valid Specific Identification made at or before the sale, with adequate lot records (see tax-lot selection). "Electing HIFO" without satisfying specific identification is not a method; it is an unsupported position.

The UK and France reality: the question doesn't apply

In the UK, gains use share-pooling: same-day, then the 30-day rule, then the Section 104 average-cost pool. In France, the article 150 VH bis proportional portfolio formula applies (see the FR calculation). Neither picks an individual lot, so FIFO, LIFO and HIFO are simply not the operative concepts. Importing a HIFO spreadsheet into a UK or French return produces a number the framework does not recognise.

A timing shift, not a saving

Matching higher-cost lots now (a HIFO-style result) defers gain, but it leaves the low-cost lots in the holding, so a larger gain surfaces later. Over the full life of the position the total gain is the same; the method only moves it in time. Treating HIFO as permanent tax reduction misstates what it does — the same caveat applies to tax-loss harvesting, which is also a timing tool.

Practical guidance

1. Establish your jurisdiction's framework first — lot-based vs pooling/portfolio.
2. US: FIFO or documented Specific ID only; no standalone HIFO/LIFO; per-wallet from 2025.
3. For a Spec-ID outcome, identify the lot at or before the sale and keep records.
4. UK/France: ignore FIFO/LIFO/HIFO — apply pooling / 150 VH bis.
5. Model the future-year effect — a smaller gain now means a larger gain later.
6. Keep consistent, documented lot records — the method is only as valid as the evidence.

Configuring a tool's method setting

Most crypto-tax tools, including Koinly and CoinLedger, expose a method dropdown that often lists FIFO, LIFO and HIFO side by side as if they were equivalent choices. For a US filer that framing is misleading, so before you rely on the output, check three things:

• The HIFO or LIFO setting is implemented as a specific identification with a contemporaneous lot record, not a figure recalculated at export time. If the tool lets you pick HIFO retroactively across past sales with no standing instruction, that result will not survive scrutiny.
• The calculation runs per wallet for US activity from 2025, not across a single universal pool.
• The tool drops lot selection entirely and applies pooling for the UK or the 150 VH bis formula for France, rather than forcing one of these three methods onto a jurisdiction that does not use them.

A plausible-looking HIFO number is worthless if the underlying identification was never made before the sale.

Worked example: FIFO vs HIFO on a US per-wallet holding

A US taxpayer holds the following ETH lots in a single wallet as of today:

Today's market price is $4,000/ETH. The taxpayer sells 2 ETH for $8,000 proceeds.

Under FIFO (the default): Lot 1 is matched — cost basis $2,400. Gain = $8,000 − $2,400 = $5,600. Holding period >12 months → long-term capital gain rate. Under the 2026 US rates, a taxpayer in the 15% LTCG bracket pays $840.

Under Specific Identification (HIFO-style, Lot 3): If the taxpayer identifies Lot 3 at or before the sale with adequate records, cost basis = $7,000. Gain = $8,000 − $7,000 = $1,000. However, Lot 3 was acquired only 3 months ago → short-term capital gain, taxed as ordinary income. At a 22% marginal rate, the tax is $220. The HIFO approach produces a smaller gain but at a higher rate.

The inter-temporal consequence: After the sale, the remaining lots differ. Under FIFO, Lot 1 is gone; Lots 2 and 3 remain with a combined basis of $12,600 against 4 ETH. Under Specific ID (Lot 3 sold), Lots 1 and 2 remain with a combined basis of $8,000 against 4 ETH — a lower remaining basis, meaning higher future gains when those lots are eventually sold. The $4,600 "saving" today becomes a larger future gain tomorrow.

The record-keeping test: For the FIFO outcome, no special record is required — FIFO is the default. For the Specific Identification outcome, the taxpayer must be able to demonstrate that Lot 3 was identified at or before the time of sale, not chosen retroactively when filing. A tool that records the identification contemporaneously (e.g. a standing HIFO instruction set before the sale) meets the standard; a spreadsheet optimised after the fact does not.

Per-wallet constraint (from 2025): Both examples work only because all three lots are in the same wallet. If Lot 1 were in a different wallet, it could not be matched against this sale — the per-wallet rule from IRS Rev. Proc. 2024-28 makes cross-wallet lot selection unavailable regardless of method.

Where Wag3s fits

Wag3s Folio won't offer you a HIFO toggle that bypasses the rules. It computes the FIFO default and, where you have made a valid specific identification, the matched-lot outcome, both per wallet for US holdings under Rev. Proc. 2024-28, and it keeps the lot-level record that shows the identification was timely. In a pooling or 150 VH bis jurisdiction it applies that framework instead of a lot method. The figures and their audit trail are built to be handed to a qualified tax adviser for the final call, not to stand in for one.

Further reading

• Crypto Cost Basis Methods 2026
• US Crypto Per-Wallet Cost Basis (2025)
• Crypto Tax-Lot Selection
• Realized vs Unrealized Gains in Crypto
• Crypto Tax-Loss Harvesting
• Crypto Capital Gains Calculation France (150 VH bis)

Sources

• IRS — Rev. Proc. 2024-28: FIFO (default) or Specific Identification; per-wallet tracking from 1 January 2025 (no standalone LIFO/HIFO elections). See also the IRS Digital assets hub.
• HMRC — Cryptoassets Manual CRYPTO22200: same-day rule, 30-day rule, and the Section 104 pool (no lot selection).
• France — Article 150 VH bis (Légifrance): the proportional portfolio formula, which is not lot-based.