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Coinpaprika 2025-01-01 16:32:31

IRS Gives Temporary Tax Relief to Crypto Users on CeFi Exchanges for 2025

The IRS has introduced a temporary measure to ease the tax burden for cryptocurrency holders using centralized exchanges (CeFi) in 2025. From January 1 to December 31, 2025, taxpayers will be allowed to use personal records or crypto tax software to choose specific asset units for tax purposes. This is an alternative to the default First-In, First-Out (FIFO) method, which could result in higher capital gains taxes, especially during bull markets. Shehan Chandrasekera , Head of Tax Strategy at CoinTracker, shared this development on December 31 via social media. He explained that the regulation under section 6045 of custodial broker rules would have forced CeFi users to sell their oldest assets first under FIFO starting January 2025. Since older assets often have the lowest cost basis, this could significantly increase capital gains and the taxes owed. The IRS acknowledged this challenge and issued a temporary solution. Now, CeFi users can identify which specific units of cryptocurrency they sell using their own documentation or software, avoiding the automatic application of FIFO. This relief only applies to transactions made in 2025. From 2026 onward, taxpayers must select an accounting method through their broker or risk being defaulted to FIFO. The IRS has been tightening crypto tax regulations in recent years, including new guidelines published on December 27. These demand that DeFi brokers collect and report detailed customer and transaction information. Efforts to combat tax evasion have also intensified, with the IRS deploying AI tools to track non-compliance.

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