Two of the three words in this question appear in the guidance and one of them does not. The IRS FAQ read for this site states a fallback method by name, and states the condition under which a taxpayer may instead pick the units themselves. It never writes HIFO. Setting out which is which is more useful than a paragraph that treats both acronyms as though a tax authority had blessed them equally.
FIFO is the fallback, and the FAQ writes it out in full
Question 41 of the virtual currency FAQ deals with the taxpayer who disposes of units without saying which ones. Its answer: “If you do not identify specific units of virtual currency, the units are deemed to have been sold, exchanged, or otherwise disposed of in chronological order beginning with the earliest unit of the virtual currency you purchased or acquired; that is, on a first in, first out (FIFO) basis.” That sentence is the only place in either IRS page read here where an acronym for a cost-basis method appears, and the acronym is FIFO. It describes what happens by default, not a method a taxpayer elects.
The alternative the FAQ allows is specific identification, on two conditions
Question 39 asks whether a holder of units acquired at different prices can choose which ones are treated as sold. The answer begins with the word Yes, and then attaches the conditions: “You may choose which units of virtual currency are deemed to be sold, exchanged, or otherwise disposed of if you can specifically identify which unit or units of virtual currency are involved in the transaction and substantiate your basis in those units.” Two things are required and neither is a preference. The taxpayer must be able to identify the unit, and must be able to substantiate its basis. Where both hold, the choice is the taxpayer's; where either fails, question 41 takes over.
Neither IRS page read here uses the word HIFO
HIFO, meaning highest in first out, does not appear in the digital assets page or in the virtual currency FAQ as this site read them on 8 September 2026. That is a recorded absence with the pages named and the date given, not a finding that the approach is disallowed. What a person describing HIFO is usually describing is a rule for choosing which unit to identify under question 39, applied consistently by software. The guidance in this ledger speaks to the identification and its substantiation, and stops there.
The United Kingdom does not run this comparison at all
A reader who arrives at this question from HMRC guidance is answering a different one. The UK rules group holdings rather than letting the seller point at a unit, and HMRC states the two exceptions plainly: “Do not pool the cost of your tokens if you buy them:”, the cases being “on the same day that you sell tokens of the same type” and “within 30 days of selling tokens of the same type”. Outside those two cases the question of which unit went first is not the taxpayer's to answer. This site keeps the two columns apart for that reason.
Questions people ask about hifo vs fifo
Does the IRS allow HIFO for crypto?
The two IRS pages read for this site do not use the word HIFO, so nothing here can say that it is named and allowed. What question 39 allows is specific identification where the taxpayer can identify the unit and substantiate its basis. Whether a particular piece of software's highest-cost selection meets that standard is a question about records, which question 40 sets out.
What happens if I do not identify the units I sold?
Question 41 answers it directly: the units are deemed disposed of in the order they were acquired, earliest first, which the FAQ itself calls a first in, first out basis. The default applies to the taxpayer who did not identify, not to the taxpayer who identified badly.
Is FIFO required in the United States?
The FAQ presents it as what happens absent identification rather than as a requirement. Question 39 answers Yes to choosing units, subject to identification and substantiation, and question 41 states the consequence of not choosing. Both sentences are quoted above with the pages they come from.
Does the UK let me choose FIFO or HIFO?
The HMRC guidance read here does not present a choice of method. It pools each type of token, with two exceptions it names: tokens bought on the same day as a sale of the same type, and tokens bought within 30 days of selling the same type. Neither exception is an election.