The implications for your taxes due would be significant, depending upon the choice (either FIFO or LIFO methods) you make. So I would suggest to try LIFO and FIFO calculators to decide which method is better for you. Here are the links for very easy-to-use handy Excel sheet for calculating the gains (after commissions) in bitcoin (or other cryptocurrency) trading using FIFO and LIFO methods.
Bitcoin Cryptocurrency LIFO (Last In First Out) Gain Calculator for Taxation https://www.eloquens.com/tool/3B4lfy9X/engineering/cryptocurrency-excel-templates/bitcoin-cryptocurrency-lifo-last-in-first-out-gain-calculator-for-taxation
Bitcoin Cryptocurrency FIFO Gain Calculator for Taxation https://www.eloquens.com/tool/3MdIAv/engineering/cryptocurrency-excel-templates/bitcoin-cryptocurrency-fifo-gain-calculator-for-taxation
Topic: FIFO for one crypto and LIFO for another? (Read 911 times)
I know that the IRS has specified that calculating your gains on bitcoin you should use FIFO or LIFO as long as you are consistent.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
LIFO would be best if you want to just defer your tax expenditure while if you are looking to cut out on some tax then FIFO would work fine by atleast averaging up your earnings after each successful fiat withdrawal or else your capital gain will keep on increasing under LIFO until you withdraw almost everything. But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
When looking at stocks and taxes it says that you can direct which shares you want your broker to sell, but you have to be ready to prove that you chose those shares.
So in reality, even if you're doing FIFO or LIFO, if you want to choose a specific set of bitcoins to sell (older coins when you had been doing LIFO or newer coins when you had been doing FIFO) you can. As long as you prove that that is what you are doing.
So as long as every trade has a unique basis (including all future trades), the system is cohesive? Are timestamped spreadsheets good enough? as long as they include every account adjustment true to my 1099? So in reality, even if you're doing FIFO or LIFO, if you want to choose a specific set of bitcoins to sell (older coins when you had been doing LIFO or newer coins when you had been doing FIFO) you can. As long as you prove that that is what you are doing.
When looking at stocks and taxes it says that you can direct which shares you want your broker to sell, but you have to be ready to prove that you chose those shares.
So in reality, even if you're doing FIFO or LIFO, if you want to choose a specific set of bitcoins to sell (older coins when you had been doing LIFO or newer coins when you had been doing FIFO) you can. As long as you prove that that is what you are doing.
So in reality, even if you're doing FIFO or LIFO, if you want to choose a specific set of bitcoins to sell (older coins when you had been doing LIFO or newer coins when you had been doing FIFO) you can. As long as you prove that that is what you are doing.
I know that the IRS has specified that calculating your gains on bitcoin you should use FIFO or LIFO as long as you are consistent.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
FIFO works excellent with Bitcoin for cutting taxes on capital gain. I haven't tried the one with litecoin till now. But with Bitcoin I always follow first in first out strategy and try to educate others about it too.But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
In a rising environment such as Bitcoin, wouldn't LIFO give rise to lower capital gains (unless you liquidate everything)? Bitcoins purchased a year back are likely to have a higher capital base than those purchased 5 years back.
There are tradeoffs to both. With FIFO you are more likely to be cashing out coins you had for over a year which are taxed at a lower rate. With LIFO you pay a higher rate but the difference in price from when you bought them to when you sold them is likely smaller.
I know that the IRS has specified that calculating your gains on bitcoin you should use FIFO or LIFO as long as you are consistent.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
FIFO works excellent with Bitcoin for cutting taxes on capital gain. I haven't tried the one with litecoin till now. But with Bitcoin I always follow first in first out strategy and try to educate others about it too.But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
In a rising environment such as Bitcoin, wouldn't LIFO give rise to lower capital gains (unless you liquidate everything)? Bitcoins purchased a year back are likely to have a higher capital base than those purchased 5 years back.
I know that the IRS has specified that calculating your gains on bitcoin you should use FIFO or LIFO as long as you are consistent.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
FIFO works excellent with Bitcoin for cutting taxes on capital gain. I haven't tried the one with litecoin till now. But with Bitcoin I always follow first in first out strategy and try to educate others about it too. But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
I know that the IRS has specified that calculating your gains on bitcoin you should use FIFO or LIFO as long as you are consistent.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
But can you choose FIFO for bitcoin and then use LIFO for litecoin?
The case use would be that you use FIFO and have fiat on an exchange that you want to move to another exchange but if you buy bitcoins then transfer to another exchange and sell you would be selling coins you bought years ago, not the coins you just bought. Thus requiring double capital gains.
But if you buy litecoins, transfer to another exchange and sell the litecoins using LIFO then you would have zero capital gains on the transfer.
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