US IRS Delays Crypto Tax Reporting Requirements to January 2026
The United States Internal Revenue Service (IRS) has delayed the activation of new tax reporting requirements for cryptocurrencies until 2026. This postponement provides temporary relief for crypto holders on Centralized Exchanges (CEXs), allowing them to avoid unfamiliar accounting methods.
IRS Finalizes Crypto Reporting Rules
Six months prior, the IRS and Treasury Department finalized new crypto reporting rules. These rules determine which cryptocurrency units are considered sold when investors hold multiple units in brokerage accounts. Taxpayers can choose an accounting method such as Highest In, First Out (HIFO) or Specific Identification (Spec ID). If not selected, the IRS defaults to the First-In, First-Out (FIFO) method, which may increase capital gains tax by assuming the oldest assets are sold first.
This rule was initially set to take effect on January 1, 2025, but has been postponed to January 1, 2026. CoinTracker Head of Tax Shehan Chandrasekera noted that some Centralized Finance (CeFi) brokers lacked support for the specific identification method, potentially forcing investors to use FIFO from early 2025. The one-year grace period allows brokers time to develop support for alternative accounting methods.
3/ IRS recognized this issue and issued temporary transition relief (Notice 2025-7), today. 👏
This means, If you sell assets inside a CeFi broker, you can still use your books & records/crypto tax software to document which specific unit you are selling.
You won't have to be…
— Shehan (@TheCryptoCPA) December 31, 2024
Chandrasekera stated that using FIFO could inadvertently lead taxpayers to sell the earliest purchased asset, usually with the lowest cost basis, thus maximizing capital gains. Commentator Mark Thomas added that FIFO could be advantageous if the sale occurs more than a year after the earliest purchase but less than a year after the latest acquisition.
Industry Fight Against IRS
This announcement follows a lawsuit filed by the Blockchain Association and the Texas Blockchain Council against the IRS. They argue that the rules mandating brokers to report digital asset transactions, including those on decentralized exchanges (DEXs), are unconstitutional. These regulations will take effect in 2027 and require brokers to disclose taxpayer information related to digital asset transactions and report gross proceeds from these sales.