IRS crypto tax regulations will be extended for an additional year, until 2026, to allow crypto exchanges to select cost-basis methods for calculating gains and losses.
In accordance with Notice 2025-07, the IRS crypto tax rule will provide taxpayers on CeFi exchanges with an additional year to employ a variety of methods for calculating gains and losses from digital asset transactions.
From January 1, 2025, the IRS mandated a wallet-by-wallet approach to cost-basis determination. Taxpayers may continue to utilize their own documents or tax software to identify specific units that have been sold or transferred in accordance with the new guidance. Brokers and taxpayers will have additional time to adjust to the upcoming regulations as the IRS crypto tax regulations will remain in effect until 2025.
The final custodial broker regulations under Section 6045 mandate that brokers employ the first-in, first-out accounting method, unless taxpayers choose alternatives such as highest-in, first-out, or Specific Identification.
Many CeFi vendors were reportedly not prepared to support Spec ID by the original deadline of 2025, which raised concerns. According to tax experts, the potential consequences of reverting to FIFO include increased tax liabilities for crypto holders when they sell their assets.
The reprieve is exclusively applicable to CeFi transactions that transpire between January 1 and December 31, 2025. Beginning in 2026, taxpayers will be required to select an accounting method through their intermediary.
In the same vein, the U.S. Department of the Treasury and IRS finalized regulations regarding the reporting obligations of DeFi brokers. These regulations mandate that brokers report the aggregate proceeds of digital asset sales via Form 1099. The action does not suggest that holders will be subject to additional tax obligations.
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