If you’re investing through Robinhood, here’s a useful new feature you may not have noticed — the ability to choose specific tax lots when selling stocks.

🚧 The Old Way: FIFO by Default

Until recently, Robinhood followed the FIFO (First-In, First-Out) accounting method by default — and you had no option to change it.

This meant that when you sold shares of a stock:

  • The oldest shares (those bought first) were sold first.
  • This had significant tax implications — older shares likely fall under long-term capital gains (taxed at a lower rate), while newer ones might be short-term (taxed as ordinary income).

Example:

You hold 20 shares of a stock:

  • 10 bought 3 years ago
  • 10 bought 6 months ago

You sell 15 shares → Robinhood would sell:

  • 10 long-term shares
  • 5 short-term shares

You had no say in which ones to sell, making tax optimization impossible.

✅ The New Way: Choose Specific Tax Lots

Robinhood now allows investors to select specific lots when selling, a feature long available in traditional brokerages like Fidelity and Schwab.

This gives you greater control:

  • Minimize tax liability by choosing long-term lots
  • Harvest losses by selling specific shares at a loss
  • Strategically manage gains for tax planning

💡 Why This Matters

  • More control = better tax efficiency
  • Enables tax-loss harvesting
  • Makes Robinhood more competitive with advanced platforms

Thanks for reading!