What Is the IRS FIFO Rule for Crypto Taxes in the 2025 Tax Season?

What is FIFO in crypto taxes, and why does the IRS say it matters in 2025?

FIFO means “First In, First Out.” When you sell crypto without specifically identifying which units you’re selling, the IRS assumes the first coins you bought are the first ones you sold.

Starting with the 2025 tax year (filed in 2026), the IRS requires cost‑basis methods to be applied on a by‑account (wallet‑by‑wallet) basis. If you don’t (or can’t) provide a specific identification, then FIFO becomes the default inside that account — not across all your wallets and exchanges.

Clinton Donnelly, founder of CryptoTaxAudit, breaks down what this change means, how it impacts your gains, and why relying on software defaults could trigger mistakes.

Traders ask all the time: What’s the difference between a universal basis and a by-account basis?
Under the old “universal” approach, you could pool coins from every wallet and exchange, then choose which lots you sold. Under the IRS’s by‑account rule, each exchange or wallet is siloed. If you sell on Coinbase, only your Coinbase lots are considered, even if you had cheaper tokens sitting on other exchanges.

Another common question: Does this rule increase my taxable gains?
For many traders and investors, it can. Because you can’t optimize across platforms anymore, FIFO by-account may raise your reported gains, especially if you bought high on one exchange and low on another.

And here’s the big concern: How will my crypto tax software handle this?
The IRS issued a transition procedure for 2025 that moves everyone off “universal pooling” and requires cost-basis reporting by account.

Many tax programs have historically used a universal basis, so for 2025, you’ll want to review your settings and confirm account-by-account tracking is turned on! Otherwise, you could end up filing incorrectly without realizing it.

💼 What you’ll learn in this video:
• Why FIFO is now mandatory for crypto in 2025
• The difference between universal vs. by-account basis
• How FIFO affects taxable gains across exchanges
• Why software defaults could trigger IRS mismatches

📞 Protect yourself now:
👉 Book a consultation: https://www.cryptotaxaudit.com/crypto-tax-consultation

🔗 Helpful IRS resources:

• IRS Virtual Currency FAQ 👉 https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions

• IRS Form 8949 👉 https://www.irs.gov/forms-pubs/about-form-8949

⏱️ Timestamps
00:00 – What is FIFO in crypto taxes?
00:20 – IRS requires FIFO in 2025
00:42 – Universal vs by-account basis explained
01:15 – Does FIFO increase taxable gains?
01:50 – How software defaults could cause errors

#CryptoTaxes #IRS #FIFO #CryptoTaxAudit #cryptotrader

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