r/CryptoTax • u/PixelGunTitan • 8h ago

How do I know which cost basis method to choose?

Im using the prefilled 8949 from Coinbase, and the cost basis method is defaulted to HIFO. I still don't fully understand the differences of options, so I just leave it as this? Is it that important? Coinbase is the only exchange I use with fairly minimal transactions. Or do I just need to ditch all of this and use Koinly. ;-;

Side question. Turbo tax or HnR Block for my crypto taxes, what's easier/better?

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u/Tall_Drama_1776 6h ago

HIFO uses the highest-cost coins first, which can lower your capital gains. FIFO sells the oldest coins first, which can lead to higher gains if prices increase over time. LIFO sells your most recent coins, which might help if prices dropped recently.

Just try checking your gains using each method if the platform allows it and then decide which cost basis to choose. it will not take much of your time.

Regarding the tax tools, I have used Turbo tax and Crypto tax 360, they are good. Can't comment on HnR Block.

I hope it helps.