---
title: "What are the supported tax lot accounting methods in LUSID?"
slug: "what-are-the-supported-tax-lot-accounting-methods-in-lusid"
tags: ["accounting", "tax-lot"]
updated: 2026-01-21T13:40:19Z
published: 2026-01-21T13:40:19Z
canonical: "support.lusid.com/what-are-the-supported-tax-lot-accounting-methods-in-lusid"
---

> ## Documentation Index
> Fetch the complete documentation index at: https://support.lusid.com/llms.txt
> Use this file to discover all available pages before exploring further.

# What are the supported tax lot accounting methods in LUSID?

LUSID supports numerous tax lot accounting methods. [See a full list](/v1/docs/what-are-the-supported-tax-lot-accounting-methods-in-lusid#supported-tax-lot-accounting-methods).

> **Note**: Tax lot accounting methods only apply to security holdings. Cash holdings are always liquidated on an average cost basis.

By default, a security [holding](/v1/docs/holdings) in a portfolio is *not* divided into tax lots. Instead, LUSID calculates an [average cost](/v1/docs/how-is-cost-calculated-in-lusid) from all transactions that contribute to an *increase* in that holding (that is, buys and short sells). This average cost is then used as a basis to calculate [realised gain/loss](/v1/docs/how-does-lusid-calculate-realised-gainloss) for transactions that contribute to a *decrease* in the holding.

The default accounting method for a portfolio is therefore `AverageCost`. You have the option to set this explicitly when you [create a portfolio](/v1/docs/how-do-i-create-a-transaction-portfolio). If you do not set the portfolio’s `accountingMethod` field explicitly, then LUSID sets it to `Default` automatically, which has the same effect as `AverageCost`.

Note the following:

- An accounting method set for a portfolio applies to all transactions loaded into that portfolio unless overridden at a more granular level for a transaction type, custodian account or individual transaction. [More information](/v1/docs/how-do-i-handle-different-tax-lot-accounting-conventions#having-lusid-determine-tax-lots-automatically).
- You can replace (or partially replace) the liquidation methodology of the incumbent accounting method by adding the `Transaction/default/PriorityTaxLots` [system property](/v1/docs/what-is-a-system-property#transaction-system-properties) to a transaction in order to dispose of particular tax lots as a priority.

For a detailed exploration of tax lots, examine [this Jupyter Notebook](https://github.com/finbourne/sample-notebooks/blob/master/examples/use-cases/ibor/Creating%20Portfolios%20With%20Different%20Tax%20Lot%20Management%20Methods.ipynb).

## Comparing the `AverageCost` and `FirstInFirstOut` accounting methods

Imagine we have a portfolio containing a single holding in an `Equity` instrument generated from the following four transactions:

| Date | Transaction type | Units | Price | Cost/proceeds |
| --- | --- | --- | --- | --- |
| Mon 2 Dec 2024 | `Buy` | 10 | 10 | 100 |
| Tues 3 Dec 2024 | `Buy` | 10 | 11 | 110 |
| Wed 4 Dec 2024 | `Buy` | 10 | 12 | 120 |
| Thur 5 Dec 2024 | `Sell` | 15 | 13 | 195 |

| `AverageCost` accounting method | `FirstInFirstOut` accounting method |
| --- | --- |
| **Holdings on Wed 4 Dec 2024 (before the** `Sell` **transaction)** |
| A single holding with 30 units is generated. The average cost is £330 / 30 = £11 per unit: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(444).png) | The holding is divided into three tax lots providing **By tax lots** is enabled, reflecting the different purchase dates and prices: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(441).png) |
| **Holdings on Thur 4 Dec 2024 (after the** `Sell` **transaction)** |
| 15 units are liquidated at £11 per unit: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(443).png) | The first tax lot of 10 units (the oldest) is liquidated at £10 per unit, and 5 units of the second tax lot at £11 per unit: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(442).png) |
| **Realised gain/loss on the** `Sell` **transaction** |
| The realised gain is £195 (proceeds) - £165 (cost) = £30: ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(445).png) | The realised gain is £40: - From the first tax lot: £130 (proceeds) - £100 (cost) = £30 - From the second tax lot: £65 (proceeds) - £55 (cost) = £10 ![](https://cdn.document360.io/d575ad81-c0ed-4980-bbd1-d59ac5c3de82/Images/Documentation/image(447).png) |

## Supported tax lot accounting methods

| Method | Explanation |
| --- | --- |
| `AverageCost` | This is the default. A holding is not divided into tax lots. Instead, LUSID calculates an average cost from all transactions that contribute to an increase in that holding. |
| `FirstInFirstOut` | The oldest tax lots are liquidated first. |
| `LastInFirstOut` | The newest tax lots are liquidated first. |
| `HighestCostFirst` `HighestCostFirstPortfolioCurrency` | Tax lots with the highest cost (in either local or portfolio currency) are liquidated first. |
| `LowestCostFirst` `LowestCostFirstPortfolioCurrency` | Tax lots with the lowest cost (in either local or portfolio currency) are liquidated first. |
| `IntraDayThenFirstInFirstOut` | Tax lots opened on the same day are liquidated first (oldest within the day first), then first in first out (that is, the oldest tax lots are liquidated first). |
| `LongTermHighestCostFirst` `LongTermHighestCostFirstPortfolioCurrency` | Long term lots are those held for 365 days or more; short term lots are those held for less than 365 days. Long term tax lots with the highest cost (in either local or portfolio currency) are liquidated first. Once exhausted, short term lots with the highest cost (in either local or portfolio currency) are liquidated first. |
| `MaximumLossMinimumGain` `MaximumLossMinimumGainPortfolioCurrency` | Tax lots are liquidated in the following order: 1. Short term loss 2. Long term loss 3. Short term no gain/loss 4. Long term no gain/loss 5. Long term gain 6. Short term gain Within these groups, highest cost first applies, and then first in first out. Assessed using either local or portfolio currency. |
| `ProRateByUnits` | Units are removed from tax lots on a proportional basis, assessed on the tax lot units portion of total units. |
| `ProRateByCost` `ProRateByCostPortfolioCurrency` | Units are removed from tax lots on a proportional basis, assessed on the tax lot cost portion of total cost (in either local or portfolio currency). |