Key Takeaways
- The IRS delays bitcoin cost-basis reporting rules until 2026, giving brokers time to upgrade compliance systems and processes.
- Investors can continue using flexible accounting methods like HIFO and Spec ID to potentially reduce tax burdens during the transition period.
- The First-In, First-Out (FIFO) method becomes the default if no accounting method is specified, potentially increasing taxable gains during price surges.
IRS Delays Bitcoin Reporting Rules Until 2026
The IRS has postponed the enforcement of new bitcoin cost-basis reporting rules until early 2026.
This delay provides brokers more time to update systems and processes required for compliance.
The extension was granted to accommodate technological challenges faced by digital asset brokers in meeting the new requirements.
Impact of Default Accounting Methods on Tax Liabilities
The delayed rules were set to enforce the First-In, First-Out (FIFO) method as the default accounting approach.
FIFO prioritizes selling the earliest acquired assets, which could lead to higher taxable gains during price increases.
Investors can benefit from more flexible accounting methods, including Highest In, First Out (HIFO) and Specific Identification (Spec ID), to minimize tax impacts.
Temporary Relief for Brokers and Investors
The extension period allows brokers to adapt their systems before the rules take effect in 2026.
The IRS acknowledged that brokers need additional time to develop technology supporting taxpayer-specific instructions.
The Treasury Department and IRS emphasized that taxpayers might otherwise struggle to meet identification standards under § 1.1012-1(j)(3)(ii).
Investors have until December 31, 2025, to utilize alternative accounting strategies before the mandatory regulations are enforced.
