Cryptocurrency Sales in 2025
If you are investing in digital assets such as Bitcoin, nonfungible tokens (NFTs), or other cryptocurrencies through a broker, then the IRS has provided some relief that can help you reduce your tax liability for sales you make in 2025.
For digital assets held in the custody of a broker, the IRS generally permits you to specifically identify which units you sell no later than the date and time of the sale or other disposition. You can identify which particular units you sell by reference to any identifier that your broker designates.
You can also make an adequate identification by using a standing order or instruction communicated to your broker, for example, an order to sell units using the last-in-first-out (LIFO) method. If you fail to make an adequate identification of units sold, then the default rule is that the first-in-first-out method (FIFO) of identification must be used. Generally speaking, FIFO will result in higher taxable gain as the longest-held units will usually have the lowest cost.
Using specific identification allows you to sell assets that have the highest basis first and therefore minimize your taxable gain. The same rule works in reverse for taxpayers who may want to recognize more gain today for strategic tax planning purposes.
The IRS recognizes that many digital asset brokers do not have systems in place to track your specific identification of assets sold, so for digital assets sold during the 2025 calendar year only, you can make an adequate identification by:
To qualify for relief, you must make the identification using either of the methods outlined above prior to the time of sale, disposition, or transfer, and retain documentation that the identification was timely made.
For digital assets held in the custody of a broker, the IRS generally permits you to specifically identify which units you sell no later than the date and time of the sale or other disposition. You can identify which particular units you sell by reference to any identifier that your broker designates.
You can also make an adequate identification by using a standing order or instruction communicated to your broker, for example, an order to sell units using the last-in-first-out (LIFO) method. If you fail to make an adequate identification of units sold, then the default rule is that the first-in-first-out method (FIFO) of identification must be used. Generally speaking, FIFO will result in higher taxable gain as the longest-held units will usually have the lowest cost.
Using specific identification allows you to sell assets that have the highest basis first and therefore minimize your taxable gain. The same rule works in reverse for taxpayers who may want to recognize more gain today for strategic tax planning purposes.
The IRS recognizes that many digital asset brokers do not have systems in place to track your specific identification of assets sold, so for digital assets sold during the 2025 calendar year only, you can make an adequate identification by:
- Identifying in your own books and records by reference to any identifier, such as the purchase date and time or the purchase price for the unit sold, that is sufficient to identify the basis and holding period of the digital assets sold; or
- Recording a standing order on your own books and records (e.g., an e-mail to your broker), provided that the recorded standing order includes sufficient information to identify any digital asset units sold.
To qualify for relief, you must make the identification using either of the methods outlined above prior to the time of sale, disposition, or transfer, and retain documentation that the identification was timely made.