FIFO vs. Specific ID: Choose Your NFT Cost Basis Method

When you own multiple NFTs from the same collection, you can choose which one you’re selling for tax purposes.

Two Methods

FIFO (First In, First Out)

Default method. Sell the oldest NFT first.

Specific Identification

Choose exactly which NFT you’re selling based on when you bought it.

Example Scenario

You own 3 Pudgy Penguins:

  • Penguin A: Bought at 2 ETH (now worth 5 ETH) → $6,000 gain
  • Penguin B: Bought at 4 ETH (now worth 5 ETH) → $2,000 gain
  • Penguin C: Bought at 4.5 ETH (now worth 5 ETH) → $1,000 gain

You want to sell one at 5 ETH.

Using FIFO (default):

Sell Penguin A → $6,000 taxable gain

Using Specific ID:

Sell Penguin C → $1,000 taxable gain

Tax savings: $5,000 less in taxable gains!

How to Use Specific ID

  1. Keep detailed records of each NFT purchase (date, price, transaction hash)
  2. Before selling, identify which specific NFT you’re selling
  3. Document your choice in your records
  4. Report consistently on your tax return

The Rule

You must identify the specific NFT before or at the time of sale. You can’t decide later when filing taxes.

Pro Tip

For large collections, maintain a spreadsheet tracking:

  • Token ID
  • Purchase date
  • Purchase price
  • Current value
  • Potential gain/loss

This lets you optimize which NFTs to sell for tax purposes.

Disclaimer: This content is for informational purposes only and should not be considered tax advice. Consult with a qualified tax professional for your specific situation.