Cost basis

Every unit you own carries its own acquisition date and its own price, and those numbers stay attached for as long as you hold. Revenue Procedure 2024-28 ended universal pooling for US taxpayers on January 1, 2025, so basis has to be tracked account by account rather than across the whole stack. Lose the record and the default assumption is a basis of zero, which taxes the full sale price.

How it works

Basis starts as the amount you handed over to acquire the coins, plus the costs of acquiring them. A purchase fee is part of what you paid, so it belongs in the number. A selling fee is not; it comes off the proceeds instead. Both reduce the taxable gain, but they enter the calculation from opposite ends.

When you sell part of a holding, something has to decide which units left. The United States lets you use specific identification if you can point to the exact units at or before the moment of sale and hold records of when each was acquired, what it cost, and its value at acquisition and disposal. Without that, first in first out applies by default and the oldest units go first. Choosing the highest-priced units instead is a form of specific identification, not a separate legal method, and it only works if the paperwork was in place beforehand.

The per-account rule changed how all of this is organized. Rather than treating your entire holding as one pool, the 2025 change requires each wallet and each exchange account to carry its own inventory of units and unpaid basis, and a sale on one platform can only draw on units held there. The revenue procedure offered a one-time safe harbor for allocating previously untracked basis across accounts as of January 1, 2025, using either a unit-by-unit assignment or a global rule. Taxpayers who skipped it are stuck with whatever allocation their records imply and cannot go back and reshuffle.

Not everything arrives by purchase, and the rules differ for each route. Coins received as payment or as a mining or staking reward take a basis equal to their market value on the day you received them, because that value was already taxed as income. A gift generally carries the giver's original basis across to you, with a separate lower figure applied if you later sell at a loss. Inherited property in the United States is usually revalued to its worth on the date of death, which can erase a lifetime of appreciation for the heir. Other systems differ sharply; the United Kingdom, for instance, ignores per-lot identification entirely and averages all units of the same asset into a single pool.

Why this matters when you buy bitcoin

The number you will need at sale is created at purchase, by you, on a platform that may not exist by then.

Fees are the first thing people leave out, and on the buying tools designed for regular saving they are not trivial. Swan charges around 0.99 percent per purchase, and River's one-time buys start around 1.2 percent while its recurring orders carry no platform fee at all. On a 10,000 dollar position accumulated at 1 percent, that is 100 dollars of basis that belongs in your records and reduces your eventual gain by the same amount. Nobody adds it for you if you are reconstructing from bank statements years later.

Withdrawing to your own keys is where records break most often. The transfer itself is not a taxable event, but the receiving wallet knows nothing about what you paid, and if you later sell through a different broker that broker will report the sale with no acquisition figure attached. Two habits fix this permanently: export the full transaction history from every venue you use at least once a year, and store it with your seed backup rather than in the account you are about to close.

There is also a distinction worth keeping straight between the chain and the tax return. Consolidating small unspent outputs into one larger output changes how your wallet stores the coins and can save real money in future fees, but it does not sell anything and does not alter basis. The lots you bought remain the lots you bought. Any tax tool that reports a gain because you tidied up your own wallet is misreading a self-transfer.

Four years of buying, and which coins you sell

The choice of which units leave first can change a tax bill by an order of magnitude, and it is made at the moment of sale rather than at the moment of purchase.

Picture someone who bought one tenth of a bitcoin every month for four years, giving 48 separate lots at prices ranging from roughly 20,000 dollars to roughly 90,000 dollars. They now sell one whole bitcoin at 100,000 dollars, and want the smallest defensible gain.

Under first in first out, the oldest ten lots go, the ones bought nearest 20,000 dollars, and the reported gain is close to 80,000 dollars. Under specific identification pointing at the most expensive lots, the ones bought nearest 90,000 dollars, the gain is closer to 10,000 dollars. Same coins, same sale, an eight-fold difference in the taxable amount.

Two conditions make the second version stand up. The units must be identified at or before the sale, not chosen afterwards when the return is being prepared, and they must all live in the account the sale happened in, because the per-account rule blocks you from reaching across platforms for a convenient lot. That is the whole practical case for keeping contemporaneous records rather than clever spreadsheets built in April.

Cost basis vs Form 1099-DA

A broker form is a report about you, not a determination of what you owe. Brokers began issuing Form 1099-DA covering gross proceeds for 2025 transactions and add acquisition figures for units acquired from January 1, 2026 onward, which leaves a long tail of older holdings the form simply cannot describe. Anything you transferred in from a wallet you control, or bought before the reporting rules started, will arrive with the acquisition column blank or marked as not covered. The figure you put on your return is the one you can substantiate with your own records, and where the two disagree, the reconciliation is your job.