2026-04-11 · 7 min read · crypto · tax · fifo · accounting

Crypto Tax Accounting: FIFO vs LIFO vs Average Cost — Which Saves You the Most?

The three methods in 60 seconds\n\n- FIFO (First In, First Out) — sell the oldest coins first. Usually the highest gains in a rising market.\n- LIFO (Last In, First Out) — sell the newest coins first. Usually the lowest gains in a rising market.\n- Average Cost (Specific Identification) — average purchase price. Smooths out volatility.\n\n## Which is legal where?\n\n- United States — FIFO default, but Specific ID allowed if you can prove which lot you sold\n- United Kingdom — mandatory Section 104 pooling (weighted average of all holdings + 30-day bed-and-breakfast rule)\n- Canada — Adjusted Cost Base (weighted average), no FIFO/LIFO option\n- Germany — FIFO by default; holdings >1 year are tax-free entirely\n- Japan — Total average method by default\n- Korea — as of 2025, 20% tax on crypto gains above ₩2.5M, FIFO assumed\n\n## The decision framework\n\nIf your jurisdiction allows a choice (US, Australia, some EU):\n\n1. Rising market + long-term holds → FIFO if held >1 year for long-term rate benefit\n2. Rising market + short holds → LIFO to defer gains\n3. Falling market → FIFO to harvest losses faster\n4. Many small purchases → Average Cost for sanity\n\n## The math that matters\n\nExample: You bought 1 BTC at $30k in Jan, 1 BTC at $50k in Jun, and sell 1 BTC at $80k in Dec.\n\n- FIFO gain: $80k - $30k = $50k taxable\n- LIFO gain: $80k - $50k = $30k taxable\n- Average: $80k - $40k = $40k taxable\n\nOn a 32% tax bracket, that's the difference between $16k and $9.6k in tax. Same trade. Same profit.\n\n## DeFi makes this 10x harder\n\nAdd in: wrapped tokens, LP positions, bridges, rewards, airdrops, impermanent loss, self-custody transfers between wallets (not taxable but must be tracked), gas fees (adjust cost basis), and suddenly you need software.\n\n## The free path\n\nCrypto Tax Calculator API — FIFO / LIFO / Average across multi-exchange + DeFi + staking. Tax brackets for US, UK, EU, Korea, Japan. Free 100/day. Pro $14.99/mo unlimited.\n\n```bash\ncurl -X POST https://api.lazy-mac.com/crypto-tax/api/v1/calculate -d '{\"method\":\"FIFO\",\"transactions\":[...],\"jurisdiction\":\"US\"}'\n```\n\nOr install the MCP server so Claude can walk through tax scenarios with you:\n\n```bash\nnpx -y @lazymac/mcp\n> Calculate my 2025 crypto tax using FIFO given these transactions: [...]\n```\n\n## Disclaimer\n\nThis is informational, not legal or tax advice. File with a licensed CPA who knows your jurisdiction's crypto rules — the above summaries change annually.

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