In Ireland, there are two main rules for calculating capital gains when you cash out or dispose of crypto. The rule you use depends on the timing of your transactions:
FIFO - applies to most cases
LIFO - applies to asset bought and sold within a period of four weeks
The primary method used for calculating gains when cashing out cryptocurrency is FIFO (First In, First Out). This rule applies to assets of the same class—for example, multiple purchases of ETH are treated as interchangeable units.
An exception to the FIFO rule applies if an asset is both purchased and disposed of within four weeks. In such cases, LIFO (Last In, First Out) is used instead.
If in this four weeks period you made some losses, you can only offset them against gains also made during the same period.
What is FIFO (First In, First Out)?
FIFO is an accounting method used to determine which assets are considered sold when you dispose of part of your holdings—such as selling cryptocurrency.
Under FIFO, the first assets you bought are considered the first ones you sell, regardless of the actual tokens or coins sent in the transaction.
Example:
1st February: User A buys 0.5 ETH for €1,000 (ETH price: €2,000)
7th April: User A buys 1 ETH for €1,600 (ETH price: €1,600)
3rd June: User A sells 1 ETH for €1,800 (ETH price: €1,800)
FIFO Calculation:
The first 0.5 ETH sold comes from the February purchase, the next 0.5 ETH from the April purchase:
Gain/loss calculation is as follow:
[(0.5*2,000)+(0.5*1,600)]-(1*1,800) = 0
What is LIFO (Last In, First Out)?
LIFO is an accounting method used to determine which units of an asset are considered sold when a portion is disposed of—such as when selling cryptocurrency.
Under LIFO, the most recently acquired assets are considered the first ones sold, regardless of which actual tokens were transferred in the transaction.
Example:
5 March: User A purchases 0.5 ETH for €950 (ETH market price: €1,900)
10 May: User A purchases an additional 0.5 ETH for €900 (ETH market price: €1,800)
2 June: User A purchases 1 ETH for €1,600 (ETH market price: €1,600)
6 June: User A sells 1.5 ETH for a total of €2,400 (ETH market price: €1,600)
LIFO Calculation:
The first 1 ETH sold comes from the June purchase, the next 0.5 from the May purchase:
Gain/loss calculation as follow:
(1.5*1,600)-[(1*1,600)+(0.5*1,800)] = -100