Quick answer
Specific identification lets you handpick which crypto lots you sell — enabling precise tax optimisation on every trade.
Accounting
United Kingdom
United States
Specific Identification
Choosing exactly which units of crypto are sold to optimise the cost basis used for each disposal.
United KingdomUnited StatesUnderstanding Specific Identification on crypto
Specific identification is a cost basis method in which the taxpayer designates exactly which units (lots) of a cryptocurrency are being disposed of at the time of sale. Rather than defaulting to FIFO or an average, specific identification allows the selection of lots that minimise the gain or maximise a loss — including choosing lots that result in long-term rather than short-term treatment. In the US, specific identification requires adequate contemporaneous records documenting exactly which lots were sold, and is typically managed through crypto tax software. The UK's pooling rules render specific identification unavailable for most UK crypto investors.
Specific identification is a cost basis method in which the taxpayer designates exactly which units (lots) of a cryptocurrency are being disposed of at the time of sale. Rather than defaulting to FIFO or an average, specific identification allows the selection of lots that minimise the gain or maximise a loss — including choosing lots that result in long-term rather than short-term treatment. In the US, specific identification requires adequate contemporaneous records documenting exactly which lots were sold, and is typically managed through crypto tax software. The UK's pooling rules render specific identification unavailable for most UK crypto investors.
What this means for your crypto activity
Maximum flexibility
Specific identification provides maximum flexibility to minimise gains or maximise losses on each trade.
Lot-level records
Records must be maintained at lot level — including acquisition date, price, and exchange for each unit.
Timely identification
The identification must be made at or before the time of sale — not retroactively.
HIFO foundation
This is the foundation of HIFO optimisation — choosing the highest-cost lots under specific identification.
Software automation
US tax software typically automates specific identification based on a selected optimisation strategy.
- Specific identification provides maximum flexibility to minimise gains or maximise losses on each trade.
- Records must be maintained at lot level — including acquisition date, price, and exchange for each unit.
- The identification must be made at or before the time of sale — not retroactively.
- This is the foundation of HIFO optimisation — choosing the highest-cost lots under specific identification.
- US tax software typically automates specific identification based on a selected optimisation strategy.
Seeing it in action
Example scenario
Jake holds three ETH lots: 1 ETH at $1,000 (24 months ago), 1 ETH at $2,500 (18 months ago), 1 ETH at $3,200 (6 months ago). He sells 1 ETH at $3,500. Under specific identification, he selects the $3,200 lot: gain = $300 (short-term). Under FIFO, the $1,000 lot: gain = $2,500 (long-term). He chooses specific identification to minimise absolute gain, accepting short-term treatment on a small amount.
How this works across jurisdictions
- United Kingdom
Section 104 pooling rules generally override specific identification; same-day and 30-day matching rules take priority but operate on matched lots, not freely chosen.
- United States
Specific identification permitted by IRS with contemporaneous records; enables HIFO and other optimisation strategies; reported on Form 8949.
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