IRS Allows Crypto Taxpayers to Choose Asset Units for 2025
The IRS has announced a temporary measure to reduce the tax burden for cryptocurrency holders using centralized exchanges (CeFi) in 2025. From January 1 to December 31, 2025, taxpayers can use personal records or crypto tax software to select specific asset units for tax reporting, rather than defaulting to the First-In, First-Out (FIFO) method. This shift aims to mitigate potential increases in capital gains taxes during bull markets.
Shehan Chandrasekera, Head of Tax Strategy at CoinTracker, highlighted this update on December 31. He noted that regulations under section 6045 would have required CeFi users to sell their oldest assets first starting January 2025, which could lead to higher capital gains and corresponding taxes due to older assets typically having lower cost bases.
The IRS recognized this issue and has implemented a temporary solution allowing CeFi users to specify which cryptocurrency units they sell based on their own documentation or software, thus avoiding automatic FIFO application. This relief is applicable only to transactions made in 2025; from 2026 onwards, taxpayers must choose an accounting method through their broker or will be subject to FIFO defaults.
In recent years, the IRS has tightened crypto tax regulations, including new guidelines issued on December 27, requiring DeFi brokers to collect and report detailed customer and transaction information. Additionally, the IRS has intensified efforts to combat tax evasion by employing AI tools to monitor compliance.