Disclaimer: CoinTracker is provided for informational purposes only. This service is not intended to substitute for tax, audit, accounting, investment, financial, nor legal advice. For financial, tax, or legal advice please consult your own professional. The information on CoinTracker is subject to change without notice. All information is provided "as is." CoinTracker disclaims any responsibility for the accuracy or adequacy of any positions taken by you in your tax returns. Please see our full disclaimer.

In the US, the IRS has not released any specific guidance for capital gains calculation methods for cryptocurrency transactions.

The existing IRS guidance states at a high level that "General tax principles applicable to property transactions apply to transactions using virtualcurrency." Unfortunately that leaves us in a grey area about which types of capital gains calculations methods are allowed.

The closest guidance on this topic is in Publication 550 about stocks, bonds, and mutual funds (not property). It states that there are two options for calculating capital gains: first-in first-out (FIFO) and specific identification. The simplest and most conservative method is FIFO, which is what CoinTracker provides by default. FIFO means that the first coin that you purchase (chronologically) is the first coin counted for a sale. With specific identification, you identify exactly which coin is being spent at transaction time. This can be ad-hoc or according to a pattern (e.g., highest-in-first-out [HIFO], last-in-first-out [LIFO], etc.)

Note however that with specific identification, you must specify to your broker/exchange, at the time of the exchange, which specific stocks (or in this case coins) you are selling/trading. Notably, this cannot be done retroactively and you must receive written confirmation from the broker/exchange that they transacted the specific coins you identified in order for specific identification to be applied.

In other (non-US) countries:

  • Australia: the ATO requires specific identification when possible, otherwise FIFO
  • Canada: the CRA requires using Adjusted Cost Base (ACB). Your capital gains go onto your Schedule 3 Form. See here for an explanation of how ACB works
  • Germany: follows the same rules as the USA
  • UK: follows sharematching, described here

You can change your cost basis method in the settings. If you have questions, please consult your tax professional for guidance on your personal situation.

Did this answer your question?