How does tax lot selection work in PortfolioPilot (HIFO, LIFO, FIFO)?
PortfolioPilot uses HIFO (Highest-In, First-Out) by default - the lots with the highest cost basis are assigned to sells first, which minimizes taxable gains in most situations.
To change the method:
- Open Preferences - Tax details.
- Select your preferred lot selection method: HIFO, LIFO, or FIFO.
The selection applies when PortfolioPilot builds your Order Execution List - it determines which specific lots are listed as the shares to sell. Your broker executes the trades; the lot selection in PortfolioPilot is the instruction you hand off to them.
A few caveats:
- Lot selection only matters for taxable accounts. In tax-advantaged accounts (IRA, 401(k), etc.), all gains are either deferred or tax-free, so the lot method has no tax impact.
- For tax-loss harvesting specifically, HIFO is usually optimal - but there are edge cases (e.g. wash-sale management across accounts) where a CPA's advice is worth getting.
