If you hold bitcoin on two exchanges and in a wallet of your own, and then sell part of it, you need to know which of your tranches counts as sold. That is what decides whether the sale stays tax-free. The answer goes by the name of crypto FIFO, and in Germany it works differently from what most holders expect: the Federal Ministry of Finance does not calculate across your total holdings but separately for each wallet and each exchange account. A sale on account A never reaches the older coins in wallet B, however long they have been sitting there.
That separation decides more in the autumn of 2026 than it did in earlier years. Providers will report to the Federal Central Tax Office under the Crypto Asset Tax Transparency Act for the current year for the first time, each one on its own. And under the draft bill on the holding period, 31 December 2026 is to become the line between protected legacy holdings and taxable new holdings. Which tranche sits in which pot has stopped being an academic question.
What FIFO means for crypto, and why individual identification comes first
FIFO stands for "first in, first out": the units bought first count as the units sold first. The term describes an assumed order of consumption, in other words an assumption about which units of a holding of the same kind leave it in a partial sale. That assumption is needed for crypto assets because one bitcoin cannot be told apart from another.
It is only needed, though, where you cannot identify the individual units. The BMF guidance on individual questions of the income tax treatment of crypto assets of 6 March 2025 puts individual identification first in Randnummer 61, its paragraph 61: the governing principle for the order of use is individual identification. Only where that is not possible do the crypto assets of one trading designation acquired first count as sold for the purposes of the holding period.
Individual identification means that you prove which specific unit you sold. On a wallet of your own with clearly separated access and unbroken records, that is possible. On an exchange account that pools deposits and withdrawals into a single balance, it generally is not. FIFO is therefore the rule in practice rather than the exception, even though it is the second step in law.
“A wallet-by-wallet view applies”: paragraph 62 of the BMF guidance
The sentence that settles the matter sits one paragraph further on. Randnummer 62 opens with the words "Es gilt eine walletbezogene Betrachtung" — a wallet-by-wallet view applies. It goes on to say that within a wallet the chosen method must be retained until all crypto assets of one trading designation in that wallet have been sold in full.
For holders, that means every wallet and every exchange account is a pot of its own with an order of its own. A FIFO calculation running across all your holdings on every platform does not exist under this administrative view. Anyone running three accounts runs three orders. This is the most common false assumption on the subject, and it cuts both ways: the separation can take away a completed holding period you never actually had, and it can leave you one you would have lost under a combined view.
The tax authorities are sticking to this reading even though it means more work for investors. The reason is easy enough to follow: the records from which any order can be derived in the first place arise provider by provider. An exchange knows nothing about your hardware wallet.
Holding period and gain calculation follow two different methods
Paragraph 61 separates two questions that are often thrown together. For the holding period, the crypto assets of one trading designation acquired first count as sold. For valuation, meaning the size of the gain, the guidance names the average cost method and refers for it to a Federal Fiscal Court ruling of 24 November 1993. For reasons of simplification, though, it may equally be assumed there that the units acquired first were sold first.
In practice, you may use FIFO for both questions but do not have to. The holding period is set by the oldest tranche in the pot concerned, while the gain can be calculated from that pot's average price. Running both on FIFO puts you on the safe side of the administrative view and leaves you with the simpler schedule.
Section 23 EStG prescribes FIFO for foreign currency amounts only
Here lies a point that many guides skip past. No statutory FIFO obligation exists for crypto assets. Section 23(1) sentence 1 no. 2 of the German Income Tax Act contains a FIFO fiction in its third sentence, and that fiction is expressly limited: where several foreign currency amounts of the same kind are acquired and sold, the amounts acquired first are to be assumed to have been sold first.
Crypto assets, under settled practice, are not foreign currency but other assets within the meaning of the same provision. The fiction in sentence 3 therefore does not apply to them directly. What applies to crypto sits in the BMF guidance, and BMF guidance is an administrative instruction to the tax offices, not a statute. It binds the offices, not the courts. That is exactly where the dispute set out further below comes from.
Is FIFO permitted in Germany?
Yes, and in two senses. FIFO is permitted for the holding period where individual identification is not possible, and it is permitted for valuation too, for reasons of simplification. Apply FIFO wallet by wallet, document it, and retain it across the entire holding of one trading designation in that wallet, and you are moving inside the administrative view.
The question the other way round is the more interesting one: whether FIFO is mandatory. The statute does not prescribe it for crypto assets; the tax authorities expect it. For the tax return, that means FIFO brings no argument, while another method may well bring one.
The order within each wallet can only be evidenced with a schedule of your own; the tax office can request the files behind it.
Worked example: the same sell order, two wallets, two tax outcomes
A worked example with round numbers shows how strongly the wallet-by-wallet view bites. Assume you hold 0.2 bitcoin in two pots:
Account at an exchange: 0.1 bitcoin, bought on 1 February 2026 for 8,000 euros. Your own hardware wallet: 0.1 bitcoin, bought on 1 June 2024 for 5,500 euros.On 20 November 2026 you sell 0.1 bitcoin for 7,000 euros. Which pot you use for it decides the outcome.
Sale through the exchange account: the oldest tranche in this pot is the purchase of 1 February 2026. Roughly nine months lie between acquisition and sale, so the one-year period is not met. The transaction is taxable, and it ends in a loss of 1,000 euros, because 7,000 euros of proceeds stand against 8,000 euros of acquisition cost.
Sale out of the hardware wallet: the oldest tranche in this pot is the purchase of 1 June 2024, more than two years back. The holding period is met and the gain of 1,500 euros stays tax-free.
The same quantity, the same day, the same price, and yet two entirely different outcomes. A FIFO calculation across platforms would consume the 2024 tranche in both cases, because it is the oldest of them all. That is precisely what paragraph 62 rules out. Knowing the difference lets you choose the pot deliberately; not knowing it means hearing about it from the tax office.
The loss in the first case is not worthless, incidentally, but it is tightly tied: losses from private disposal transactions may be offset only against gains of the same kind, not against wages, interest or equity gains. How far that offsetting reaches across the years is set out below in the section on the exemption threshold.
The election exists per wallet and per trading designation
Paragraph 62 grants two separate elections. The first applies per wallet: in every pot you decide independently whether you apply individual identification, the average cost method or FIFO. The second applies per trading designation, meaning per type of coin. Where crypto assets with differing trading designations are held through one wallet, a separate election exists in each case.
You may therefore choose one method for bitcoin in your hardware wallet and another for ether in the same wallet, and another again for bitcoin on the exchange account. What you may not do is switch back and forth within the same pot for the same type of coin. That consistency is the price of the election.
A change of method is possible only after a complete sale
The commitment does not end with the calendar year; it ends with the holding. Under paragraph 62, the chosen method must be retained until all crypto assets of one trading designation in that wallet have been sold in full. Only after a complete disposal and a subsequent fresh acquisition of crypto assets of that trading designation can the method be changed.
An example: you sell all the bitcoin in your hardware wallet and buy bitcoin into the same wallet again two months later. From that fresh acquisition onwards, the choice of method is open to you once more. But as long as a single satoshi of the old trading designation remains in that pot, the method once chosen stands. Anyone hoping to switch annually, as some other tax questions allow, finds no door here.
LIFO and HIFO: the dispute between the tax authorities and a tax court
Alongside FIFO, practice knows two further procedures. Under LIFO ("last in, first out") the units bought last count as sold first; under HIFO ("highest in, first out") the most expensive ones do. Both can lower the tax burden, LIFO above all where older tranches have already met the holding period and the holder wants to leave them untouched.
The administrative view does not mention these procedures. Several tax firms do report, however, on a decision of the Nuremberg tax court of 22 January 2025 in which the court is said to have held LIFO admissible alongside FIFO, on the grounds that no specific statutory rule exists for crypto assets. The accounts of the case number and of whether the decision is final diverge, and no clarification from the Federal Fiscal Court, the highest court in tax matters, is available.
For practical purposes the position therefore stays a sober one: FIFO matches what your tax office expects. Another method is legally defensible but will with some probability lead into a dispute that you have to conduct and evidence yourself. Anyone weighing that route talks to a tax adviser beforehand, not to a forum. Our earlier assessment comparing FIFO and LIFO for crypto in Germany sets out the background in more detail.
How to keep track of your tranches wallet by wallet
The schedule that has to carry all of this is manageable, but it has to be kept per pot. For every wallet and every exchange account you need a list of its own, and in that list each inflow and each outflow carries the date, the quantity, the type of coin, the price in euros, the fees and the nature of the transaction. Paragraph 102 of the BMF guidance frames the standard as being that every private disposal transaction can be traced individually and in its own right.
In concrete terms, every line holds at least the ticker or the full name of the crypto assets concerned, the number of units, the gain with acquisition cost and disposal proceeds, or the time and the rate of purchase and sale, together with the holding period. Anyone who did not buy in euros also states the market rate and the source it was taken from. A spreadsheet is enough for that; from a three-figure number of transactions upwards, a crypto tax tool or portfolio tracker does the work more reliably, because it keeps the pots separate automatically.
On a transfer between your own wallets, the acquisition data travels with it
A transfer from one wallet of your own into another wallet of your own is not a sale. It triggers no tax and does not reset the holding period. What it does do is move a tranche out of one pot and into another, and with that the order in both of them changes.
The original acquisition data therefore has to travel with it. Paragraph 103 of the BMF guidance expressly names the documentation of reallocations within wallets, for the wallet-by-wallet application of the average cost or FIFO method, as a record a tax office can request. Send a tranche from the exchange to your own hardware wallet without noting the purchase date and you have not lost the holding period, but you can no longer evidence it. What else is worth watching when moving between providers is written up in our piece on switching crypto exchange and the holding period.
What your exchange reports to the Federal Central Tax Office from 2027
Up to 2026, the order of your tranches was a matter between you and your tax return. That is changing. The Crypto Asset Tax Transparency Act obliges providers under section 9(1) to transmit information on reportable users to the Federal Central Tax Office annually, by 31 July at the latest, for the preceding reporting period in each case. The transmission runs electronically via an officially prescribed data record.
The first report therefore covers the current calendar year and reaches the authority in the summer of 2027. Which details flow in, and why the amount reported is not your gain, is something we took apart in our assessment of the crypto reporting obligation and the gross amount. That providers need a tax self-certification from you for it, and that accounts without that certification can be restricted, is set out in the piece on self-certification at the crypto exchange.
Under the draft bill, 31 December 2026 is to separate legacy holdings from new holdings; the law has not been passed.
The report comes provider by provider, not as one combined holding
This is where the circle closes back to the wallet-by-wallet view. Reporting happens per provider, because each provider holds only its own records. The Federal Central Tax Office therefore receives several data records about the same person, one per exchange, and no consolidated total holding. Your own wallet, which no provider operates, appears in none of those records.
Two things count in the end. First, the structure of the reporting matches the structure of the taxation: both run pot by pot. Second, your own schedule is the only place where the pots come together. If a reconciliation raises questions, because an exchange has reported a high gross turnover for instance, that schedule is your evidence. Without it, the exchange's figure stands there on its own.
31 December 2026 separates legacy holdings from new holdings
Running alongside the reporting obligation is the reform of the holding period. Under the draft bill, gains from crypto assets acquired after 31 December 2026 are to become taxable regardless of how long they were held; for purchases up to that cut-off date, grandfathering is envisaged. The plan has not been passed: the Bundestag rejected an abolition of the holding period in October, and a cabinet date expected for the middle of October passed without a decision. We track the state of the legislation in our assessment of grandfathering and the 31 December cut-off date.
Should the draft become law in this form, the order within each pot matters even more. The acquisition date of every single tranche then decides whether it can still become tax-free at all. And because the order applies wallet by wallet, the pot you sell from decides whether you touch protected legacy holdings or not. Anyone who wants to keep that cleanly separated later needs the acquisition data per wallet now.
Can the tax office see into your wallet?
Not directly. The information documented in a blockchain is open to anyone, but because public keys pseudonymise it, it allows no direct inference about the identity of individual taxpayers. The BMF guidance expressly assigns that information to the sphere of the taxpayers, who are closer to the evidence. Handing over a public key alone is not enough for the office to discharge the burden of proof; share it, though, and it can be used to check what you have declared.
Indirectly the reach is wider than that sounds. The office can request tax reports and, with them, the files they were produced from, such as transaction statements or CSV files. Once it has exhausted its own enquiries, through a block explorer for example, the guidance also regards requesting screen recordings from a wallet or an exchange account as proportionate. With providers based abroad, an extended duty of cooperation under section 90(2) of the German Fiscal Code applies on top: you have to clarify the facts and obtain the evidence, by retrieving the transaction statements regularly and in full. Missing records and data losses, after an insolvency of the trading platform or an attack for instance, fall to your detriment under this instruction.
The 1,000 euro exemption threshold and the offsetting of losses
Two figures belong to any FIFO calculation. The first is the exemption threshold: under section 23(3) sentence 5 of the Income Tax Act, gains stay tax-free where the total gain realised from private disposal transactions in the calendar year came to less than 1,000 euros. The decisive word is threshold: where the total gain reaches 1,000 euros or more, it is taxable in full, not merely the part above the line. And the count runs across all private disposal transactions of the year, meaning across all the pots together.
The second concerns losses. These may be offset only up to the amount of the gain you realised from private disposal transactions in the same calendar year. A deduction from other types of income is ruled out; a carry-forward into later years and a carry-back into the immediately preceding year are possible in accordance with section 10d EStG, but again only within the same type of income. For the choice of method, that means a loss from the young pot is no free pass, and is usable only inside those narrow limits.
Crypto FIFO: every wallet counts on its own, and 31 December decides
The wallet-by-wallet view is no formality. It is the lever the tax exemption of a sale hangs on. Three steps bring your records up to the state that 2027 will demand:
List the pots. Write down every wallet and every exchange account separately, and assign to each tranche its acquisition date, its quantity and its euro price. A tax tool or portfolio tracker takes this over where there are many transactions and keeps the pots apart. Retrieve the transaction reports. Get the complete history from every provider as a file while you still have access, and store it safely. Which providers deliver usable reports is covered in the exchange comparison; with platforms based abroad, the extended duty of cooperation applies. Choose the pot before you sell. Use your list to see which tranche is the oldest in the pot concerned before you place an order. Transfers into a hardware wallet of your own are tax-free, but they shift the order and have to be documented with the acquisition date.(As of October 19, 2026. This article is not investment advice. Prices and fee structures change; check the terms with the provider before you buy.)
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