Specific Identification

Most cost basis methods—like FIFO (first in, first out)—sell your oldest shares automatically. Specific identification flips the script: you choose which tax lots to sell in each transaction, giving you precise control over what shows up on your tax return.

Here's a quick example. Suppose you bought 100 shares at $50, another 100 at $75, and another 100 at $90. The stock is now at $80. With specific identification you can pick the $90 lot to harvest a loss, the $50 lot to take a gain, or the $75 lot for something close to breakeven. Same sale, very different tax results.

To use this method, you need to tell your broker which lots you're selling at the time of the trade and get confirmation. Most modern brokerages make this easy—you just select the lots on-screen when placing a sell order.

The upside is obvious: you can harvest losses when you need them, minimize gains when that makes sense, and manage holding periods so gains qualify for the lower long-term rate. The downside is that every sale requires a deliberate decision, and sloppy record-keeping can disqualify the method entirely.

For crypto, specific identification is particularly useful since you've probably bought the same token at many different prices. You'll need to keep detailed records showing exactly which units you sold in each transaction—date, time, amount, and cost for every acquisition.