Which Shares Get Sold First, FIFO or Specific Lot, and How Does It Change My Taxes?

Buy the same stock three times at three prices and every later sale raises a quiet question: which of those shares did you just sell?

What people on X are asking

In July 2026 a thread on cost basis methods explained that when you have bought the same investment at different times and prices, you have a choice about which shares count as sold, and that the choice changes the tax you owe. An October 2025 post shared a guide on the same theme: the specific shares you sell can raise or lower the tax on your winners, with FIFO, LIFO, HIFO and specific lot ID as the options. And in March 2026 a reply in a dividend discussion reminded an investor that buying more at a higher price does not change the basis of the original shares, which are the ones taxed first under FIFO (reply). That last point is correct for individual stocks.

What people in the thread said

• @MARCELLUScryp, continuing the thread, wrote that FIFO is the default, sells your oldest shares first and "often produces the highest taxable gain". Usually true in a rising market, but the highest gain is not always the highest tax: old lots are likely long-term, taxed at lower rates, while a newer lot may be short-term. Run the numbers per lot, as below.

These are community comments, summarised in our words; the data and sources below come first.

The fact-checked answer

The default rule. IRS Publication 550 says that if you cannot adequately identify the shares you sell, their basis is the basis of the shares you acquired first, and that, apart from certain mutual fund shares, you cannot use an average price per share. The Treasury regulation (26 CFR 1.1012-1(c)) says the same: unidentified shares are charged against the earliest lot. FINRA's investor guide repeats it as the "first in, first out" method.

How to identify a lot. When your broker holds the shares, Publication 550 says you identify them by telling the broker which shares to sell at the time of the sale and receiving written confirmation within a reasonable time. The regulation adds the deadline: identification must be made no later than the trade's settlement date, and a standing order for specific identification counts. In practice: pick the lot on the order ticket, or set a default such as "highest cost" before you sell.

A worked example. You own 300 shares of one stock bought in three lots, and in November 2026 you sell 100 shares at $110.

Selling 100 shares at $110: same trade, four tax results

UXS illustration with round prices. 15% and 24% are example rates; your rates depend on income (IRS Topic 409). A net capital loss can offset other gains and up to $3,000 of ordinary income a year. Commissions and fees, which add to basis, are ignored. Tap a column header to sort.

Method	Lot treated as sold	Cost per share	Gain or loss	Holding period	Tax at example rates
FIFO (default)	Lot A, bought Mar 2023	$40	+$7,000	Long-term	$1,050 at 15%
Specific lot: Lot B	Lot B, bought Feb 2025	$90	+$2,000	Long-term	$300 at 15%
Specific lot: Lot C (also LIFO and highest cost)	Lot C, bought Aug 2026	$120	−$1,000	Short-term	Saves up to $240 at 24%
Average cost (funds and DRIP shares only)	Average of all three	$83.33	+$2,667	Long-term	$400 at 15%

Why it is deferral, not a saving. Picking Lot C instead of Lot A swings this year's result by $8,000. But Lot A, with its $40 basis, is still there and will be taxed when sold. Specific identification moves tax between years and rates, which can still be worth a lot.

Watch the wash sale rule. If you sell a lot at a loss and buy the same stock within 30 days before or after, the loss is disallowed and added to the basis of the new shares. Selling the newest, highest-cost lot to book a loss while still buying regularly is the classic way to trip it; see what the wash sale rule is.

Quick poll

Which lot method does your brokerage account use?

• FIFO, the default
• Highest cost or tax-optimised
• I pick lots on each sale
• I have never checked

Save my answer

What each answer means

• FIFO, the default: You are selling your oldest shares unless you choose otherwise on each order.
• Highest cost or tax-optimised: Usually minimises this year's gain; check short-term versus long-term.
• I pick lots on each sale: The most control; keep the confirmations.
• I have never checked: Look in your account's tax or cost basis settings before your next sale.

Your answer is stored only in this browser (localStorage). UXS does not collect, count or publish votes, so no totals are shown.

Reporting. Brokers report cost basis and short- or long-term status on Form 1099-B, FINRA notes, but you remain responsible for your return; check it against your records.

Free PDF

Tax lot selection worksheet (PDF)

List your lots before you sell part of a position.

Lots

For this sale

Checks

1. Lot chosen and confirmed by the broker by settlement
2. Any purchase of the same stock within 30 days (wash sale)
3. Effect on this year's total gains and the $3,000 loss limit
4. Copy of the confirmation saved for tax time

Fill-in fields in the PDF: Lot 1: date bought, shares, cost per share; Lot 2: date bought, shares, cost per share; Lot 3: date bought, shares, cost per share; Shares to sell and expected price; Gain or loss per lot, and short- or long-term.

Download the PDF (44 KB, made by UXS, no sign-up)

Decision helper

Checklist

1. Check your account's default cost basis method.
2. Before a partial sale, list every lot with date and cost.
3. Choose the lot on the order or by standing instruction, before settlement.
4. Save the broker's written confirmation.
5. Check the 1099-B against your own records in February.

Common mistakes

• Assuming the broker sells your most expensive shares by default.
• Choosing a lot after the trade has settled.
• Ignoring the short-term versus long-term difference.
• Booking a loss while an automatic purchase buys the same stock within 30 days.

For holding periods, see how long to hold a stock for long-term capital gains; for dividends that add lots, how much reinvesting dividends adds to S&P 500 returns; and for crypto, how crypto gains are taxed in the US.

FAQ

Which shares are sold first if I don't choose?

The earliest shares you bought (FIFO), under IRS Publication 550 and the Treasury regulation.

What is specific lot identification?

Telling your broker exactly which purchase lot you are selling, so your gain uses that lot's cost.

When do I have to identify the lot?

No later than the settlement date of the sale; a standing instruction also counts.

Can I use average cost for stocks?

Generally no; average basis is allowed mainly for mutual fund shares and shares in dividend reinvestment plans.

Does choosing high-cost lots avoid tax?

It defers it: the cheaper shares remain and will produce a larger gain when sold.

Where is the default method set?

In your brokerage account's cost basis or tax settings.