Cost Basis Methods
Understand the cost basis methods Forbidden Finance supports for investment holdings, what each means at tax time, and which methods are available on each tier.
Overview
Cost basis is what you originally paid for an investment. When you sell, the difference between sale price and cost basis is your gain or loss — and that is the number tax authorities care about. The same sale can produce a very different tax bill depending on which lots you "consider sold." Forbidden Finance lets you choose how those lots are tracked.
What Each Method Means
Aggregate
Treats every share of a holding as if it were bought at the average price across all your purchases. Simple to understand and the closest to "I just want to see my position."
Best for: most users, especially if you do not actively sell investments.
Reconciled
Forbidden Finance still computes an aggregate cost basis automatically from Plaid data, but you can override individual values when Plaid is wrong (it sometimes is, especially for holdings transferred between brokerages). The reconciled value is what shows up in your gain/loss calculations.
Best for: investors who occasionally clean up bad Plaid data.
Per-Lot FIFO
Each purchase is tracked as a separate "lot" with its own cost and acquisition date. When you sell, the oldest lot is consumed first (First In, First Out). This is the default tax treatment for stocks in most jurisdictions.
Best for: investors who want lot-level reporting that lines up with how a brokerage 1099-B is usually printed.
Per-Lot LIFO
Same as FIFO, but the newest lot is consumed first (Last In, First Out). Often produces a smaller short-term gain in a rising market and a smaller short-term loss in a falling one.
Best for: crypto investors who want LIFO for short-term swing trades. Forbidden Finance enforces an account-wide LIFO rule for crypto holdings: if you select LIFO on any crypto holding, every crypto holding in the same account is treated as LIFO. This matches how most tax authorities expect crypto to be reported consistently.
Per-Lot Specific-ID
Each sale specifies exactly which lot was sold. Maximum control — and maximum bookkeeping. Useful when you are doing tax-loss harvesting or trying to optimize a specific basket of long-term vs. short-term gains.
Best for: tax-optimization-focused investors with complex portfolios.
Tier Availability
| Method | Free | Starter | Pro | Premium |
|---|---|---|---|---|
| Aggregate | Yes | Yes | Yes | Yes |
| Reconciled (Plaid + your edits) | -- | -- | Yes | Yes |
| Per-Lot FIFO | -- | -- | -- | Yes |
| Per-Lot LIFO (crypto-only guard applies) | -- | -- | -- | Yes |
| Per-Lot Specific-ID | -- | -- | -- | Yes |
Per-lot tracking is a Premium feature because the bookkeeping required to keep lots accurate is substantial — Forbidden Finance backfills historical lot data from your brokerage, runs a nightly verification pass to make sure nothing has drifted, and keeps an audit trail you can reference if your accountant asks questions.
How to Choose a Method
Start with Aggregate
If you are not actively trading, Aggregate is fine. Your gain/loss numbers will be close enough for planning purposes.
Move to Reconciled if Plaid data is wrong
If a holding shows a clearly incorrect cost basis (for example, transferred from another brokerage with no history), upgrade to Pro and set the value yourself. Reconciled is a one-time cleanup, not ongoing maintenance.
Move to Per-Lot for tax season
If you sell investments and care about which lots count, upgrade to Premium and pick FIFO, LIFO, or Specific-ID per holding. Forbidden Finance will track each lot from now on and historical lots are backfilled where Plaid provides them.
Switching Methods
You can change the cost basis method on a per-holding basis at any time. Switching does not modify your tax liability for past sales — it only affects how future sales are computed. Past sales remain bound to whichever method was active when they happened.
Tax law is jurisdiction-specific and changes frequently. Forbidden Finance's cost basis methods are tools — your accountant or tax software is the authority on what method you can actually use to file. If in doubt, ask before you sell.
Frequently Asked Questions
Will my historical sales recompute when I switch methods?
No. Past sales keep the cost basis they were calculated with. Switching only affects future sales.
Can I use FIFO for stocks and LIFO for crypto in the same account?
Yes for accounts that have both equity and crypto holdings: equity holdings can use FIFO or Specific-ID independently, but if any crypto holding in the account uses LIFO, the LIFO rule applies to all crypto holdings in that account. This guard prevents the most common tax-reporting inconsistency.
Where does Forbidden Finance get historical lot data?
From Plaid, when your brokerage provides it. Some brokerages share full lot history, some only share aggregate position data. If your brokerage does not share lot history, you can enter lots manually in the Investments screen.
What if Plaid and my brokerage disagree on a lot?
Plaid's data is the upstream source. If you spot a discrepancy, edit the lot in Forbidden Finance — your override is preserved through future syncs. The reconciliation engine flags persistent mismatches in the Investments view so you can review them.
Related Articles
Tax-Lot Export
Export your full lot history as CSV for your accountant.Net Worth Overview
How investment balances feed into net worth.Add Assets
Add manual investments outside of Plaid sync.Subscription Settings
Upgrade your tier to access Reconciled or Per-Lot methods.Need more help? Contact us at support@403fin.io.
Last updated 2 weeks ago
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