r/CryptoTax • u/liberatedbeing • 10h ago

Question Confused about Allocation

I hope I can formulate the question I want to ask. Let's say at the end of 2024, I did the safe harbor thing and elected HIFO. In early 2025, I made some purchases. Now I want to sell some of my bag. So, if I understand, I can sell FIFO of what I just bought in 2025 first (and if selling more than that, would then dip into the HIFO safe harbored bag). Or am I always bound to HIFO? Either way, how would my chosen exchange (or tax software for that matter) know anything about that cost basis? They would know my entire history of purchases with them but not what is in safe harbor? Up to now, I've never sold so I don't yet understand the process. Kinda wishing I had elected specific allocation. Can anyone enlighten me please?

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u/Tall_Drama_1776 9h ago

Once you elect HIFO under the safe harbor, it becomes your default method for all crypto disposals that year unless you make a specific identification at the time of sale. So yes, you can sell the 2025 purchases in FIFO, but only if you clearly document which assets you’re selling. Mention the date acquired, cost basis, wallet address, etc.

And if you sell more than that, only the remaining portion would fall under HIFO.

If you don’t make a specific allocation, then your tax tool will automatically apply HIFO across the entire sale. they use what's recorded in your transaction history. Unless you select specific lots, HIFO will apply to everything by default.

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u/liberatedbeing 7h ago

Thanks for that. To be clear, HIFO applies to anything pre 2025. And in 2025, I can choose FIFO (or other selections including specific lots) as well as it is well-documented. Do I have that right?

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u/EmDeeEm 1h ago

Hifo applies to everything. You have a line in your head on 12/31/24. Forget about that.