Do you feel confused about capital gains, FIFO and SpecId, and investment taxes ? Here is a quick intro, in the context of plain text accounting. This information is unvetted, just my current understanding; so do your own research / use professional advice when appropriate. Last updated: 2025-12-24
If you have traditional investments or cryptocurrencies, you will typically incur
In most countries, these affect how much tax you owe, and they must be tracked in detail. From these numbers (revenues, expenses, long term and short term capital gains), you can calculate the tax due or prepare a tax filing.
Revenues and expenses are relatively easy to track and report; but capital gains can be difficult, depending on your country's rules.
For traditional investments, capital gains are calculated by your investment broker, and provided to you as a report suitable for tax filing each year.
If you want to check your broker's calculations, or if you want to calculate in a different way, you could use one of the PTA app methods below (calculate gains manually, or using builtin/third party gains calculator).
Or, these calculations can often be done by tax preparation software, or accounting/portfolio management apps such as Quicken, Personal Capital, Sharesight.
Here the calculations are similar, but the landscape is more complicated. If you have only used a centralised exchange, that will probably calculate gains for you, similar to an investment broker. But if you have used self-managed wallets, decentralised exchanges, or other defi apps, you will be responsible for calculating gains and taxes owed from these.
Cryptocurrency tax calculator apps exist to meet this need. These
There are two kinds:
Online cryptocurrency tax calculators.
Bitcoin.Tax, Cointracker, Coinledger, Koinly, Summ, TokenTax are some of
these. While convenient, online calculators add rather serious privacy
risk: when they are hacked or infiltrated, potentially your entire past,
present and future cryptocurrency activities can be seen and
analysed.
Offline cryptocurrency tax calculators.
These tend to be less featureful but more private. Some of them are:
This works to an extent, but the results can be limited and suboptimal, eg if you use multiple brokers. In particular in the cryptocurrency world people often use self-managed blockchain wallets, decentralised exchanges, and other defi apps such as liquidity pools or smart contracts, which typically don't provide gains reports.
Using subaccounts, you can keep track of each lot and its cost (across acquisitions, transfers, splits, merges and disposals); and select the appropriate lot(s) and costs to dispose of, as required by local regulations; and thereby calculate the proper gain/loss in each disposal.
This method is intuitive, educational, and robust; it can be a good way to get started. But above a certain volume of transactions it can become unmanageable.
Ledger and Beancount have builtin syntax for selecting lots at disposal time, and reports which show the resulting capital gains. Beancount has the most robust support, and there might be some third-party plugins which enhance it. hledger doesn't have this feature built in, but there are some third-party calculators which can use its data. (hledger-lots, lotter..)
If you are already using a PTA app, this might be more convenient than dealing with another app. However the current PTA gains calculators might be too limited to handle some situations, eg inter-wallet transfers.
For each PTA account representing an investment account or cryptocurrency wallet,
In the case of cryptocurrency, "wallet" has a broad meaning here:
Ideally, you could export double entry data directly to the gains/tax calculator, which would be more robust.
Like the above, but move the data directly from your cryptocurrency wallets to the tax calculator, without using any other accounting app. The tax calculator may be able to automate some or all of the exporting/transforming/importing; otherwise it must be done manually.
In the PTA world at least, we call an amount and its cost basis (original acquisition date and cost) a "lot".
When you transfer a lot to another account that you own, usually that's not a taxable event. The cost basis remains an attribute of the lot.
You can split a lot, by transferring part of it to another account that you own. Then you have two smaller lots, each with the same cost basis.
Multiple lots with the same cost basis could be merged back into a single lot, if desired. But lots with different cost basis can't be merged.
An account can have a balance consisting of multiple lots.
When you transfer an amount out of a multi-lot account, you need to select which lot(s) and/or part of lot is being transferred, according to some disposal order.
Disposal is when you get rid of some quantity of an asset, eg by spending it, giving it as a gift, or trading it for something else.
Sometimes lots are required to be disposed of in a certain order, based on their original acquisition date and/or cost. These include:
In some cases, instead of tracking the original cost of every lot, all of an asset's lots are treated as having the same cost: their weighted average cost. This simplifies things, and makes disposal order irrelevant.
In the USA, calculating cryptocurrency gains requires:
Before tax year 2025, disposal order was determined with "universal cost tracking" - by considering all your holdings of an asset across all wallets.
From tax year 2025, it must be determined with "per-wallet cost tracking" - separately within each wallet (or in the case of multi-account wallets, within each wallet account).
The "Safe Harbor" rule allows you to (once) allocate pre-2025 lots to specific wallets, at your discretion. This could help optimise taxes in some cases.
You can freely transfer amounts between your wallets/accounts; their original cost basis (acquisition date, acquisition cost) moves with them. These transfers are not considered taxable events and do not incur capital gains.
You are allowed to freely choose disposal orders within a year or within a wallet - eg SpecId when it minimises gains, FIFO otherwise. If not using FIFO, you are expected to be able to back this up with records showing that the decision was made at transaction time. Ie, you're not allowed to change the disposal order to optimise the outcome, after the fact.
In tax year 2026, this flexibility with choosing disposal order might be reduced.
https://www.gov.uk/government/publications/shares-and-capital-gains-tax-hs284-self-assessment-helpsheet/hs284-shares-and-capital-gains-tax-2024#how-to-work-out-the-gain-for-shares-in-a-section-104-holding https://assets.publishing.service.gov.uk/media/65f993439316f5001164c2d7/HS284_Example_3_2024.pdf example calculation
In the UK, you use each asset's average cost across all wallets. "In some aspects this is simpler because there is no FIFO/LIFO, just a common pool that gets revalued. OTOH it is more complicated due to the special time based rules that create 3 classes of shares, each with its own matching rules."
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