Crypto Cost Basis and Accounting Methods

What cost basis represents

Cost basis generally represents what was originally paid to acquire an asset, including applicable fees. It's a foundational figure used to work out a gain or loss when that asset is later sold or disposed of.

Why accounting method matters

When someone has acquired the same asset at multiple different times and prices, an accounting method is needed to determine which specific units are considered sold in a given transaction. Different methods can produce different calculated gains or losses from the exact same set of transactions.

FIFO as one general example

First in, first out (FIFO) is one commonly discussed accounting method, which assumes the earliest-acquired units are the ones sold first. This is presented here as a general educational example, not a universal rule — other methods exist and applicable rules vary by jurisdiction.

Fees can affect cost basis

• Fees paid when acquiring an asset are generally considered part of its cost basis.
• Keeping detailed records of every transaction, including fees, supports more accurate cost basis calculations later.
• Cost basis records matter for every disposal, not just an eventual full sale.

What to remember

• Cost basis generally represents what was paid to acquire an asset, including fees.
• An accounting method, such as FIFO, determines which specific units are treated as sold.
• Different accounting methods can produce different calculated results from the same transactions.
• This is general, educational information — not personalized tax advice.