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Crypto Cost Basis Tracking After Rev. Proc. 2024-28: Wallet-by-Wallet, the Safe Harbor

By chrisomo

Crypto cost basis tracking changed fundamentally on January 1, 2025, when Rev. Proc. 2024-28 ended universal basis tracking and required taxpayers to account for basis on a wallet-by-wallet, account-by-account basis. The procedure also provided a safe harbor to allocate unused basis across wallets for pre-2025 holdings. This new regime interacts directly with Form 1099-DA broker reporting.

What is crypto cost basis tracking?

Cost basis tracking is the process of recording what a taxpayer paid for each unit of crypto so that gain or loss can be computed correctly on disposition. Gain or loss under IRC Section 1001 equals amount realized minus adjusted basis. With crypto, the same taxpayer often holds units acquired at many different prices, across many wallets and exchanges, so the rules for which units are deemed sold and how basis is assigned directly determine the tax result.

The stakes are real because the ordering rule alone can change a taxpayer’s gain by a large margin. A taxpayer who bought the same coin at a low price years ago and again at a high price recently will report very different gain depending on whether the old, low-basis lot or the new, high-basis lot is treated as sold. Before 2025, a universal pool let the taxpayer reach across every wallet to pick a lot; now the available lots are confined to the wallet that sends the coin. Getting basis tracking right is therefore not a clerical afterthought but a substantive driver of the tax owed, and the rules changed enough at the start of 2025 that prior-year habits can produce wrong answers.

Before 2025, many taxpayers used a universal or aggregate approach, pooling all units of a given coin across every wallet into one basis ledger. Rev. Proc. 2024-28 replaced that with a wallet-by-wallet, account-by-account model. The change affects ordering rules, specific identification, and the way taxpayers reconcile to broker statements. This sits within the broader crypto tax accounting framework.

The reason the IRS moved to per-wallet basis is alignment with broker reporting. A digital-asset broker can only see the units held in the account it custodies; it cannot know the basis of coins sitting in a taxpayer’s hardware wallet or at another exchange. If taxpayers continued to pool basis universally while brokers reported per account, the figures would never reconcile, and the matching program that drives much of IRS enforcement would break down. By requiring taxpayers to keep basis the same way brokers report it, the procedure makes the Form 1099-DA figures and the taxpayer’s Form 8949 comparable line by line. The cost of that alignment is a heavier recordkeeping burden on taxpayers who hold across many venues.

The tax treatment

Under IRC Section 1012 and the digital-asset regulations, basis is the cost of the unit, including acquisition fees. On disposition, the default ordering rule is first-in, first-out unless the taxpayer adequately identifies the specific units sold. Specific identification, including a high-in, first-out approach implemented through adequate identification, lets the taxpayer choose which units are deemed sold to manage gain. Highest-in, first-out is not a separate statutory method; it is specific identification applied to select the highest-basis lots.

The pivotal change from Rev. Proc. 2024-28 is that, effective January 1, 2025, basis and the ordering rules apply separately within each wallet or account rather than across the taxpayer’s entire position. If a taxpayer sells from Wallet A, only the units in Wallet A are available to identify; the taxpayer cannot reach into Wallet B’s lots to optimize. This aligns the taxpayer’s records with how brokers report and removes the aggregate pooling that previously allowed cross-wallet basis selection.

To handle pre-2025 holdings whose basis had been tracked on an aggregate or incomplete basis, the procedure offered a safe harbor. Under it, a taxpayer allocated any unused basis to the units held in each wallet or account as of the beginning of January 1, 2025, using a reasonable allocation method specified in the procedure, such as a global allocation or a specific-unit allocation, documented before the relevant deadline. Completing the safe-harbor allocation establishes the starting per-wallet basis that the new regime then carries forward.

The two safe-harbor allocation methods serve different taxpayers. The specific-unit allocation lets the taxpayer match identified basis lots to particular units in particular wallets, which suits a taxpayer with clean historical records who wants to place high-basis lots in wallets expected to be sold first. The global allocation applies a consistent rule across all wallets, which suits a taxpayer whose historical records were never clean enough to trace individual lots. Whichever method is chosen, the allocation had to be made by the deadline in the procedure and recorded so it could be substantiated on examination. A taxpayer who never made the allocation is exposed to the risk that the IRS treats the earliest-acquired units as having the earliest basis under a default ordering, which may not match the taxpayer’s expectations.

The change also affects loss harvesting. Under the prior universal approach, a taxpayer could identify high-basis lots from anywhere in the aggregate pool to realize a loss while keeping low-basis lots untouched. After Rev. Proc. 2024-28, the taxpayer can only harvest losses from lots actually held in the wallet from which the disposition occurs. A taxpayer who wants to realize a loss on high-basis units must first ensure those units sit in the wallet that will execute the sale, which can require an on-chain transfer before the disposition. Transfers between a taxpayer’s own wallets are generally not themselves taxable dispositions, but they do move the basis lots and so change which lots are available in each wallet.

The accounting and reporting treatment

Form 1099-DA is the information return digital-asset brokers use to report customer dispositions. The reporting regime is being phased in: gross proceeds reporting begins for transactions in the first applicable year, with basis reporting added thereafter for covered securities acquired in or after the basis-reporting start year. Because each broker reports at the account level, the per-account basis required by Rev. Proc. 2024-28 is what makes a taxpayer’s records reconcile to the broker’s 1099-DA. Mismatches between a taxpayer’s aggregate records and a broker’s per-account figures create IRS matching risk. The proposed delivery mechanics for these forms are covered in our piece on IRS proposed electronic 1099-DA delivery rules.

For financial-statement purposes, an entity holding crypto applies cost-basis methodology disclosure under ASC 350-60-50, which requires disclosure of the method used to determine the cost of crypto assets disposed. The wallet-by-wallet tax requirement and the GAAP disclosure requirement both push toward granular, lot-level recordkeeping. Dispositions and the resulting gain or loss are reported on Form 8949 and Schedule D, and our Form 8949 instructions cover the line-by-line mechanics.

The phase-in schedule for Form 1099-DA matters because covered and noncovered status determines whether the broker reports basis at all. For the first applicable reporting year, brokers report gross proceeds but not basis. In a later covered year, basis reporting begins for units acquired in or after that year while held in the broker’s custody. Units a taxpayer transferred into the broker from a self-custody wallet are generally noncovered for basis, so the taxpayer must supply the basis. This creates a recurring reconciliation pattern: the broker reports proceeds, the taxpayer supplies the basis for noncovered units, and the Form 8949 must reflect both. Where the broker reports a basis figure the taxpayer disagrees with, the taxpayer adjusts on Form 8949 using the basis-adjustment columns rather than ignoring the 1099-DA.

Reconciliation is no longer a once-a-year exercise for active traders. Because each wallet and each broker account is its own basis ledger, a taxpayer moving assets among a hardware wallet, two centralized exchanges, and a DeFi protocol must maintain four separate basis trails and reconcile each against any 1099-DA the custodial accounts issue. Software that previously pooled everything into one ledger has to be reconfigured to honor wallet boundaries, and the import of historical transactions has to respect the safe-harbor allocation made at the January 1, 2025 transition. Practitioners reviewing a client’s crypto reporting should confirm that the client’s tracking tool was switched to a per-wallet method for the 2025 tax year and did not silently continue universal tracking.

Basis methods within each wallet comparison

Worked example

Assume a taxpayer holds bitcoin in two wallets at the start of 2025. Wallet A: 1 BTC bought at $20,000. Wallet B: 1 BTC bought at $60,000. The taxpayer completed the Rev. Proc. 2024-28 safe-harbor allocation, assigning the $20,000 basis to Wallet A and the $60,000 basis to Wallet B.

• Pre-2025 world: under a universal approach, the taxpayer could have treated both as one $80,000 pool and, on selling 1 BTC for $70,000, used specific identification to pick the $60,000 lot, reporting a $10,000 gain regardless of which wallet sent the coin.
• Post-2025 world: the taxpayer sells 1 BTC for $70,000 out of Wallet A. Only Wallet A’s lot is available. Basis is $20,000, so the gain is $70,000 minus $20,000, or $50,000.
• To use the $60,000 basis lot, the taxpayer would have had to sell from Wallet B, producing a $10,000 gain. The wallet the coin leaves now drives the basis available.
• Reconciliation: the Wallet A broker reports the sale on Form 1099-DA at the account level. The taxpayer’s per-account records must match the $20,000 basis to avoid a mismatch.

The example shows the practical consequence of the change: basis optimization is now constrained to the wallet from which the coin is actually sent, and aggregate pooling across wallets is no longer permitted.

Recent guidance (IRS rulings, Rev. Procs., FASB updates)

Rev. Proc. 2024-28 is the controlling guidance. It ended universal basis tracking, required per-wallet and per-account basis effective January 1, 2025, and provided the safe-harbor allocation for pre-2025 holdings. The procedure works alongside the digital-asset broker reporting regulations finalized for Form 1099-DA, which phase in gross-proceeds reporting first and basis reporting in a later covered year.

The underlying statutory framework includes IRC Section 1012 on basis and the digital-asset reporting provisions enacted in prior infrastructure legislation that created the broker reporting obligation. Notice 2014-21 remains the foundation for treating crypto as property. For entities, ASC 350-60-50 requires disclosure of the cost-basis method used for crypto dispositions, complementing the tax recordkeeping requirement.

Practitioners should also watch the interaction between the wallet-by-wallet rule and the wash-sale question. The wash-sale rule of IRC Section 1091 by its terms applies to stock and securities, and crypto is treated as property rather than a security under current law, so the wash-sale disallowance has generally not applied to direct crypto positions. That means a taxpayer can currently realize a crypto loss in a wallet and reacquire the same coin shortly after without the loss being disallowed, subject to economic-substance and step-transaction considerations. Legislative proposals to extend wash-sale treatment to digital assets have circulated, so this is an area to monitor; if enacted, the per-wallet tracking already in place would make wash-sale identification more tractable because the lots are already segregated by account.

Common pitfalls

• Continuing universal basis tracking after 2024. Rev. Proc. 2024-28 requires per-wallet, per-account basis effective January 1, 2025.
• Skipping the safe-harbor allocation. Without the documented allocation, pre-2025 basis may not be properly assigned to wallets at the transition.
• Trying to use another wallet’s lots. Specific identification and HIFO operate only within the wallet from which the coin is sold.
• Defaulting away from FIFO without adequate identification. If the taxpayer does not adequately identify units, FIFO applies within the wallet under the regulations.
• Failing to reconcile to Form 1099-DA. Per-account broker figures must match the taxpayer’s per-account basis or matching notices follow.
• Forgetting acquisition fees in basis. Basis under IRC Section 1012 includes fees, and omitting them overstates gain.
• Ignoring the GAAP disclosure. Entities must disclose the cost-basis method for disposals under ASC 350-60-50.

Frequently asked questions

What changed for crypto basis in 2025?

Rev. Proc. 2024-28 ended universal basis tracking and required basis to be determined per wallet or account, effective January 1, 2025.

Can I still pool all my coins for basis?

No. Aggregate pooling across wallets is no longer permitted; basis and ordering rules apply within each wallet or account.

What is the safe harbor?

A method in Rev. Proc. 2024-28 that let taxpayers allocate unused, untracked basis from pre-2025 holdings to specific wallets as of January 1, 2025, using a documented reasonable method.

Do FIFO, HIFO, and specific ID still apply?

Yes, but they now operate within each wallet. HIFO is specific identification applied to choose the highest-basis lots in that wallet.

What is Form 1099-DA?

The information return digital-asset brokers use to report customer dispositions, phasing in gross-proceeds reporting first and basis reporting in a later year, at the account level.

Why does per-account basis matter for reporting?

Because brokers report per account on Form 1099-DA, your per-account basis must match to avoid IRS matching notices.

Does basis include fees?

Yes. Under IRC Section 1012, basis includes acquisition costs such as fees.

What if I did not complete the safe harbor?

Pre-2025 basis may not be properly allocated to wallets, which can complicate identification and create reconciliation problems on disposition.