The U.S. Internal Revenue Service (IRS) has officially extended its crypto tax relief policy through the end of 2026, enabling investors to use alternative methods for identifying which crypto assets are sold, rather than being forced to apply the first-in, first-out (FIFO) method.
Key Policy Changes
Previously, the IRS mandated FIFO for crypto sales, meaning investors had to report the oldest coins first, often resulting in higher capital gains taxes. The new rule allows methods such as specific identification, where investors can choose to sell more recently acquired, higher-cost assets to minimize taxable gains.
The IRS stated the goal is to ease compliance burdens for both investors and exchanges. Starting in 2025, exchanges will only need to report gross proceeds from transactions. Cost-basis data will be required for assets purchased in 2026. Additionally, the IRS proposed making electronic submissions the default for tax reporting, further streamlining the process.
Market and Industry Reactions
The extension has been praised by the crypto industry. Analysts say it reduces tax uncertainty and may encourage more trading and staking activity. Exchanges also face lower initial compliance costs, as they no longer need to provide cost-basis details for all transactions.
However, the relief only applies to reporting requirements; investors remain obligated to accurately report all crypto transactions and maintain records. The IRS expects enhanced transparency after full electronic reporting takes effect by 2026.