What are the Tax Lot Matching Methods in Tax Optimizer?

The Tax Optimizer lets you manage your trades' gains and losses for tax purposes by changing a tax lot's matching method. The system default is First In, First Out (FIFO). Choose from the following tax lot matching methods in Tax Optimizer:

Specific Lot - Lets you see all of your tax lots and closing trades, then manually match lots to trades. The Specific Lot method is available in Method for All and per transaction, but it cannot be set as the Default Match Method.

First In, First Out (FIFO) - The default method for matching tax lots. Sales are paired with the earliest purchases sequentially. FIFO assumes that assets remaining in inventory are matched to the most recently purchased or produced assets. FIFO is always used for futures, options on futures and cryptocurrencies.

Last In, First Out (LIFO) -  Each sale is paired with the most recent possible purchase. LIFO assumes that an entity sells, uses or disposes of its newest inventory first.

Maximize Long Term Gain - Sales are paired based on the following priorities:

1. Maximize Long-Term Gain per share
2. Maximize Short-Term Gain per share
3. Minimize Short-Term Loss per share
4. Minimize Long-Term Loss per share

Maximize Long-Term Loss - Sales are paired based on the following priorities:

1. Maximize Long-Term Loss per share
2. Maximize Short-Term Loss per share
3. Minimize Short-Term Gain per share
4. Minimize Long-Term Gain per share

Maximize Short-Term Gain - Sales are paired based on the following priorities:

1. Maximize Short-Term Gain per share
2. Maximize Long-Term Gain per share
3. Minimize Long-Term Loss per share
4. Minimize Short-Term Loss per share

Maximize Short-Term Loss - Sales are paired based on the following priorities:

1. Maximize Short-Term Loss per share
2. Maximize Long-Term Loss per share
3. Minimize Long-Term Gain per share
4. Minimize Short-Term Gain per share

Highest Price - Seeks to maximize losses while minimizing gains. This method first looks at all possible ways to match a closing trade to an open lot. Sales are then paired using the following rules:

• If any possible matches would result in a loss, the method chooses the match that results in the largest possible loss.
• If no possible match would result in a loss, the method chooses the match that results in the smallest possible gain.

Tax Loss Harvesting - A pre-trade matching strategy submitted via the Tax Loss Harvesting tool.

NOTE

• Changing "Today's Method" will automatically update the matching strategy for all closing trades for that day EXCEPT the pre-trade strategy for Tax Loss Harvesting. However, you can overwrite this method on a per-trade basis using the method drop-down on the closing trade row and selecting a new lot matching method. 

Additional Information

• How do you access the Tax Optimizer?
• Can I change the default tax lot matching method?
• What is a wash sale?
• How do I update cost basis information for transferred securities?
• Why did the cost basis of my position change?
• How do I configure the tax basis for the account?