For U.S. federal income tax purposes, calculate crypto cost basis for each acquisition lot in U.S. dollars, then compare the adjusted basis of the units disposed of with the amount realized. A crypto-for-crypto swap generally disposes of the asset you give up; moving assets between wallets you own generally does not. The records must also show which units you disposed of and what happened to any crypto used to pay a fee.
This guide addresses individuals holding cryptocurrency as a capital asset. Business inventory, gifts, inheritance, compensation, staking or mining income, DeFi activity, and state or non-U.S. tax rules can require different analysis. Rules and forms change by tax year, so use the IRS instructions for the return year you are filing.
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What cost basis means for cryptocurrency
Cost basis is generally the U.S.-dollar cost of acquiring an asset, including qualifying acquisition costs. When you sell, swap, or otherwise dispose of crypto, calculate the gain or loss by subtracting the adjusted basis of the units disposed of from the amount realized, both measured in U.S. dollars.
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Gain or loss = amount realized − adjusted basis of the units disposed of.
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The IRS’s 2025 Instructions for Form 8949 state that digital-asset basis is the cost to acquire the asset, including transaction fees, commissions, transfer taxes, and other acquisition costs. Keep acquisition and disposition dates and times, quantities, and dollar values precise enough to identify the units and determine their holding periods.
How to calculate basis for a purchase or receipt
For a purchase
Record the amount paid, the units acquired, the acquisition date and time, and qualifying costs of acquiring them. Add qualifying acquisition costs to the purchase cost to determine the lot’s basis. For example, if a hypothetical purchase costs $1,000 and has $10 of qualifying acquisition costs, the lot’s total basis is $1,010. If the purchase acquired 2 units, the corresponding per-unit basis is $505, before any later adjustments.
For crypto received in a transaction
Record the asset, units, timestamp, and fair market value (FMV) in U.S. dollars. IRS FAQ 26 says that for an acquisition facilitated by an exchange, the exchange-recorded value is the FMV. For a peer-to-peer or other non-exchange transaction, FAQ 27 uses FMV at the time recorded on the ledger; an explorer analyzing worldwide indices may be evidence if it accurately represents FMV.
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How to calculate gain or loss on a crypto trade or sale
- Identify the units disposed of. Determine which tax lots the transaction used under the applicable identification rules.
- Calculate adjusted basis. Use the basis attributable to those units, including applicable acquisition costs and any required adjustments.
- Determine amount realized. Record the U.S.-dollar value received and account for transaction costs allocable to the disposition under the applicable rules.
- Subtract basis from amount realized. The result is a gain if positive and a loss if negative.
- Record the holding period and transaction details. Preserve the dates, quantities, values, and supporting records for the return.
For instance, suppose a hypothetical lot has an adjusted basis of $4,000 and the units are later sold for $4,600, with no transaction costs or other adjustments. The gain is $600. This example illustrates the arithmetic only; the correct basis and amount realized depend on the actual lot, transaction, and costs.
Is swapping one cryptocurrency for another taxable?
Generally, yes. A swap disposes of the digital asset you transfer. Calculate the amount realized in U.S. dollars, subtract the adjusted basis of the units surrendered, and track the asset received as a new acquisition.
IRS FAQ 72 says the basis of a different digital asset received in an exchange is its cost: the FMV used to determine the amount realized on the transferred asset. Exchange transaction costs are allocable to the asset disposed of and may not be added to the received asset’s basis. As a result, a swap’s fee treatment can affect the gain or loss on the old asset without increasing the basis of the new one.
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How to treat transaction fees and gas fees
IRS FAQ 53 defines digital-asset transaction costs as cash or property paid for services to effect a purchase, sale, or disposition. Examples include transaction or gas fees, transfer taxes, and commissions. Apply the costs to the relevant transaction rather than automatically adding every fee to the basis of the asset received.
If you pay a service fee with crypto, or crypto is withheld to pay it, the crypto used for the fee is itself disposed of and may have a gain or loss. Record the fee-paying asset, units, U.S.-dollar value, and timestamp as a separate transaction. A fee paid to move assets between your own wallets is treated differently: amounts paid for services solely to transfer assets between your own wallets or accounts are not digital-asset transaction costs under FAQ 53.
Are transfers between your own wallets taxable?
A transfer between wallets, addresses, or accounts belonging to the same taxpayer generally is not a taxable disposition. It does not create new basis or restart the holding period. Carry the original acquisition lots forward rather than treating the receiving wallet as a new purchase.
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Keep enough information to match both sides of the movement: sending and receiving addresses or accounts, transaction IDs, asset, quantity, date and time, and any fee. If an exchange issues an information return for a transfer, that form alone does not make an own-wallet movement taxable, according to the IRS FAQ on dispositions. Analyze any crypto paid as a transfer fee separately because the fee asset may have been disposed of.
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How to identify which units you sold
Tax-lot identification is separate from the physical movement of tokens. The IRS FAQs describe specific identification and default chronological rules. Which rule applies depends on the transaction date, custody arrangement, and whether the identification was made and documented as required.
| Situation | Identification rule or consideration | Records to keep |
|---|---|---|
| Broker-custodied disposition after December 31, 2025 | Identify the particular units to the broker no later than the date and time of disposition, using identifiers the broker designates as sufficiently specific. | Evidence of the timely identification and the broker’s designated identifiers, plus records supporting the units’ acquisition and basis. |
| Qualifying broker-custodied disposition during 2025 | IRS Notice 2025-7 provides temporary alternative identification relief, including an eligible books-and-records method. The method is subject to the notice’s conditions. | Records showing the method used and that the applicable conditions were met. |
| Units held in an unhosted wallet | Keep records that meet the specific-identification requirements. If they are not met, the default generally treats the earliest acquired units in that wallet as disposed of first, regardless of when units were transferred into it. | Acquisition chronology, wallet records, basis support, and any evidence identifying the units disposed of. |
| Hosted wallet that is not a broker account | The IRS FAQs distinguish this custody arrangement from a broker account. Determine which rules apply to the actual account and transaction. | Account and custody details, transaction records, and documentation of any unit identification. |
For broker-custodied dispositions after December 31, 2025, do not assume you can select lots after the transaction: the identification must be made to the broker by the disposition date and time. For unhosted-wallet dispositions, a transfer into the wallet does not change the default acquisition order described by the IRS. These rules make complete lot histories important even when assets have moved among wallets.
For units held before January 1, 2025, Revenue Procedure 2024-28 provides transitional guidance for reasonably allocating unattached basis to remaining units by wallet or account as of that date. It is a transition rule, not authorization to use one continuing portfolio-wide average-cost pool for later dispositions. Do not assume a method applies retroactively; check the requirements for the transaction date and custody type.
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IRS recordkeeping guidance calls for records sufficient to establish the positions taken on a federal return, including receipts, sales, exchanges, dispositions or transfers, and FMV. Keep records that let you rebuild each lot and connect wallet movements without losing its history.
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- Exchange statements and downloadable transaction exports.
- Wallet addresses, account details, transaction hashes, and matched transfer records.
- For each acquisition or receipt: asset, quantity, date and time, U.S.-dollar value, and qualifying acquisition costs.
- For each disposition: asset and units disposed of, date and time, amount realized, costs, and the basis lots used.
- Fee details, including the asset and units used when a fee is paid in crypto.
- Evidence supporting FMV, such as exchange records or an appropriate ledger-time valuation source.
- Evidence of specific lot identification and the method used to allocate basis.
If exchange history is missing, treat it as a reconstruction problem. Document the sources used, timestamps, conversion method, and any uncertainty; do not fill gaps with invented values.
How to report crypto dispositions and reconcile Form 1099-DA
For digital assets held as capital assets, report sales and other dispositions on Form 8949 and summarize them on Schedule D. The 2025 Form 8949 instructions use boxes G, H, and I for short-term digital-asset transactions and J, K, and L for long-term transactions; the applicable box depends on whether basis was reported and which statement was received. Some transactions with basis reported and no adjustments may qualify for summary reporting directly on Schedule D. Follow the instructions for the specific return year.
Form 1099-DA reporting is being phased in. IRS guidance says gross-proceeds reporting begins for covered transactions effected on or after January 1, 2025, while basis reporting applies to certain covered transactions on or after January 1, 2026. The coverage and phase-in are limited. Do not assume every transaction appears on a form, that every form reports complete basis, or that a missing reported basis means your basis is zero. Reconcile broker documents with your own transaction and lot records.
When to get tax help
Consult a qualified tax professional if basis is uncertain, historical records are missing, transactions are high value, or activity involves a business, DeFi, gifts, inheritance, compensation, staking, mining, or other specialized facts. Use current IRS instructions and guidance for the return year involved; this general workflow does not determine the treatment of every transaction.
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