New Crypto basis reporting requirements have recently been outlined in Revenue Procedure 2024-28 and are set to take effect on January 1, 2025. The most impactful changes for our clients will likely be the change from universal basis reporting to wallet and account specific tracking.  If a taxpayer holds cryptocurrency in more than one account, they will need to prepare for this change by adopting one of two safe harbor methods for tracking basis for the digital assets they hold as of 1/1/2025.

Specific Unit Allocation

The first safe harbor method is the specific unit allocation method. This method requires taxpayers to track the basis of each individual unit of cryptocurrency they held as of 1/1/2025. This method involves identifying the exact cost and acquisition date of each unit and matching it to the specific unit sold or exchanged. This method demands meticulous record keeping to make sure that each unit is correctly accounted for.

Global Allocation

The second safe harbor method is the Global Allocation method.  In contrast, the global allocation method allows taxpayers to create a set of rules to allocate basis among wallets and the units within those wallets. The taxpayer must document these rules by 1/1/2025 and the rules described by the taxpayer must not allow for discretion after that date.

Preparing for the Changes

Taxpayers that anticipate holding Cryptocurrency in multiple accounts as of the end of 2024 should be sure to review their cryptocurrency holdings and adopt a safe harbor plan by the end of the year. Once the transition has occurred, basis tracking will be completed on a wallet by wallet or account by account basis.