The IRS has just announced some temporary relief for crypto enthusiasts using centralized exchanges. From January 1 to December 31, 2025, you can specify the exact digital asset units you're selling. Yes, that's right, no more being shackled to the dreaded FIFO method. This could make life a lot easier for many of us trying to figure out our crypto.com taxes.
What’s the Deal?
Here’s the scoop. The IRS has rolled out a temporary relief program for crypto holders. It’s designed to ease the transition to the new custodial broker regulations set to kick in at the start of 2025. Previously, if you were buying and selling on CeFi exchanges, you were forced to sell your oldest coins first (FIFO) which could mean higher taxes. Now, you can actually choose which units to sell, at least for one year.
The IRS is giving us a year to breathe, to figure things out, and to pick our preferred method of accounting for crypto assets. But come January 1, 2026, if you don’t pick, you’re back to FIFO.
What This Means for You
For the year 2025, you can use your own records or crypto tax software to identify which units you sold. It’s a huge relief for users who might have had to sell their oldest coins first. This also opens the door for some interesting strategies.
It’s a win for those who have been saying all along, “I want to sell my high-basis coins, not my low-basis ones!”
The Bigger Picture
While the temporary relief applies to centralized exchanges, it also emphasizes the need for them to get their accounting software in order. It’s going to be a race to see who gets it right first.
The IRS expects that by 2026, exchanges will have the technology in place. The ones that don’t will likely see their customers migrate to those that do.
A Competitive Edge?
There’s definitely a competitive edge for exchanges that can offer these capabilities. If they can provide users with the ability to specify which units to sell, it could mean better user retention and trust. But we have to wonder if this will open up new avenues for cryptocurrency exchange compliance.
After all, the IRS is keeping a close eye on this evolving landscape.
Easing Compliance Headaches
This temporary relief could also ease some of the compliance headaches for exchanges and users alike. The administrative burden of tax reporting is a lot to handle, and not everyone has the luxury of time or resources to navigate the complexities alone.
It’s not a perfect solution for everyone, but it’s a step in the right direction.
The Challenges Ahead
Of course, there are challenges ahead. The new regulations are going to require some heavy lifting from the crypto exchanges, and they need to get their systems in place. There are also transitional relief and phased implementations to consider.
Bottom line, this is a great move by the IRS, but can they keep up with the demands of the industry?
