Which cost basis method is recommended for minimizing taxes on cryptocurrency investments?

3 answers

• Feb 17, 2022 · 3 years ago
  One commonly recommended cost basis method for minimizing taxes on cryptocurrency investments is the First-In-First-Out (FIFO) method. FIFO assumes that the first assets you acquired are the first ones you sell. This method can be advantageous if you have a long-term holding strategy and want to minimize short-term capital gains taxes. However, it may not be suitable if you have significant gains in your earlier purchases and want to take advantage of specific identification of assets to minimize taxes on specific transactions.
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• Feb 17, 2022 · 3 years ago
  Another cost basis method that can help minimize taxes on cryptocurrency investments is the Specific Identification method. This method allows you to choose which specific assets you are selling, which can be beneficial if you want to strategically sell assets with lower cost basis to minimize capital gains taxes. However, it requires meticulous record-keeping and may not be suitable for everyone.
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• Feb 17, 2022 · 3 years ago
  At BYDFi, we recommend using the Specific Identification method for minimizing taxes on cryptocurrency investments. This method allows you to optimize your tax strategy by strategically selecting the assets you sell. However, it's important to consult with a tax professional to ensure compliance with tax regulations and to determine the best cost basis method for your specific situation.
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