Nikolas Sargeant
The IRS has announced a temporary relief measure for cryptocurrency holders engaging with centralized finance (CeFi) exchanges in 2025, offering a reprieve before new tax regulations take effect. The move comes ahead of the implementation of Section 6045 custodial broker rules, set to require FIFO (First-In, First-Out) accounting for digital assets, unless a preferred method like HIFO (Highest-In, First-Out) or Specific Identification (Spec ID) is chosen.
Heads up, crypto investors! The IRS is making BIG changes starting Jan 1, 2025, and if you don’t prep now, you could pay more in taxes or face penalties.
— Shehan (@TheCryptoCPA) December 15, 2024
Here’s what you need to do before the year-end to avoid penalties, save money, and stay ahead of the game. 🧵
Shehan Chandrasekera, Head of Tax Strategy at Cointracker, explained the relief on social media, noting that CeFi exchanges are not yet prepared to support Spec ID by the January 1, 2025, deadline. Without the relief, many crypto holders would have been forced into using FIFO, potentially leading to higher tax liabilities during asset sales—particularly problematic in a bull market when selling earlier, lower-cost assets could trigger larger capital gains.
Heads up, crypto investors! The IRS is making BIG changes starting Jan 1, 2025, and if you don’t prep now, you could pay more in taxes or face penalties.
— Shehan (@TheCryptoCPA) December 15, 2024
Here’s what you need to do before the year-end to avoid penalties, save money, and stay ahead of the game. 🧵
The temporary relief allows crypto holders to use their own records or tax software to track and identify the specific units being sold, instead of relying on FIFO by default. This flexibility will be available from January 1, 2025, through December 31, 2025. Starting in 2026, however, taxpayers will need to select an accounting method with their CeFi exchange or risk defaulting to FIFO.
Chandrasekera emphasized that no immediate action is required to benefit from this relief, but he advised users to ensure their CeFi exchange’s accounting method aligns with their crypto tax software to avoid discrepancies.
