Do You Need Per-Wallet Crypto Cost Basis Now?

Yes. For US taxpayers, every sale, swap or transfer of crypto completed on or after January 1, 2025 is matched to the units held in the specific wallet or exchange account it left, not to a single pool of everything you own. Treasury Regulation 1.1012-1(j) sets that rule, and Rev. Proc. 2024-28 gave holders a one-time way to split their pre-2025 basis across wallets.

That one-time step is mostly in the past now. As of October 22, 2026, the safe harbor's deadlines have run for nearly everyone, and the 2025 relief for broker accounts in Notice 2025-7 ended on December 31, 2025. So this guide is written for the question most people actually have today: what the per-wallet rule means for sales in tax year 2026, how a migration done on time looks on paper, and what to raise with a tax professional if it was never done. Every rule cited below was read in the official text on October 22, 2026.

For taxable events and reporting forms in general, see our overview of how the IRS taxes crypto in the United States. This page covers one question: which units you sold, and where their basis lives.

What Actually Changed in 2025

Before 2025, the rules for choosing which units were sold came from the IRS's virtual currency FAQs. FAQ 39 said you could choose which units were sold if you could specifically identify them and substantiate their basis. FAQ 40 described how: by a unit's unique digital identifier, or by records of all units held "in a single account, wallet, or address" showing four things (acquisition date and time, basis and value at acquisition, disposal date and time, and value and proceeds at disposal). FAQ 41 set the fallback: without identification, units are treated as sold first in, first out. The IRS now labels that set of FAQs as generally applying to transactions completed before January 1, 2025.

The FAQs did not say in so many words that identification stopped at the edge of one wallet. Rev. Proc. 2024-28 records that commenters told Treasury many taxpayers had read them as permitting a "universal" or "multi-wallet" approach: selling coins out of one wallet while attaching the basis of coins sitting in another, or running FIFO across every wallet and exchange at once. The same comments warned that the limits of basis-tracking software could widen the gap between taxpayers' records and what brokers report.

The final regulations, published as T.D. 10000 in the Federal Register on July 9, 2024 (89 FR 56480), close that door. Section 1.1012-1(j)(6) makes the identification rules apply to all acquisitions and dispositions of digital assets on or after January 1, 2025. The statutory basis is Internal Revenue Code section 1012(c)(1), which requires account-by-account basis conventions for "specified securities," a category the 2021 Infrastructure Investment and Jobs Act extended to digital assets.

What Counts as "a Wallet" for This Rule

The regulation borrows its definitions from Treas. Reg. 1.6045-1(a)(25):

That last point matters because one wallet can generate many receiving addresses, a pattern our explainer on how Bitcoin address formats differ helps make sense of. The definition ties holdings to the wallet that generated the address, not to each address separately. For a plain-language primer on keys, custody and the hot and cold distinction, see what a crypto wallet is and how it stores keys.

One shortcut the IRS has ruled out: FAQ 96 in its newer digital asset FAQs says that writing all your private keys into one duplicate backup does not turn your separate wallets into a single wallet. A combined seed backup is a security arrangement, not a tax consolidation.

Which Identification Rule Applies to Each Place You Hold Coins

Not in a broker's custody. This covers an unhosted wallet you control, and (per IRS FAQ 83) a hosted wallet run by a provider that is not acting as a broker for those units. Under Reg. 1.1012-1(j)(2), you make a specific identification if, no later than the date and time of the sale or transfer, you record on your own books which units are going, using any identifier sufficient to pin them down, such as purchase date and time or purchase price. You must also keep records that show the units actually left that wallet. Miss either step and paragraph (j)(1) applies FIFO within that wallet. The lot you identify also decides how a loss sale behaves; our guide to the wash sale rule and loss harvesting works a three-lot example with stated numbers.

In a broker's custody. Under paragraph (j)(3)(ii), the identification has to be given to the broker, no later than the date and time of the sale, by reference to an identifier the broker designates as specific enough. IRS FAQ 85 adds that which identifiers count is "solely within the discretion of your broker." A standing order counts. If the broker offers only one way to select units, that method is treated as your standing order and, per FAQ 89, you may not use another for transactions after December 31, 2025. Without a valid identification, paragraph (j)(3)(i) treats the earliest-acquired units in the broker's custody as sold.

Two details apply to both groups. First, the date units arrived in a wallet or account is ignored for FIFO purposes: it is the original acquisition date that counts. Second, in a crypto-to-crypto trade where the broker withholds part of what you receive to cover fees or backup withholding, paragraph (j)(3)(iii) deems the withheld units to come from the units just received, whatever standing order you have.

Here is that logic as a decision table for a sale in tax year 2026.

The Transition: Rev. Proc. 2024-28 in Plain Terms

Years of pooled records leave basis that no longer lines up with the coins sitting in each wallet. Rev. Proc. 2024-28, released June 28, 2024, gave a safe harbor under section 1012(c)(1) to fix that once, with a snapshot taken "as of January 1, 2025," which it defines as immediately after the close of your day on December 31, 2024.

The vocabulary is worth learning because the examples below use it:

The safe harbor lets you make "any reasonable allocation" of unused basis to wallets holding the same number of remaining units, per type of asset. Bitcoin and ether are separate types, and a failure for one does not spoil the other. The conditions in section 4.02 are short but strict: the units must be capital assets, the basis must come from the same type of asset, you must have records showing the number of remaining units in each wallet, and records showing the number of units of unused basis, their original per-unit cost and their acquisition dates. The allocation is irrevocable. And section 5.04 is blunt that the safe harbor only governs where basis goes, not how much of it you have: the amount still has to be substantiated separately.

There were two ways to make the allocation, with different deadlines.

Example 4 in the revenue procedure shows what happens when a holder using a global allocation picks specific units for a sale before finishing the allocation: the pick is ignored, and FIFO within that wallet applies instead. The procedure also excludes allocations whose amounts were already before a court, the IRS Independent Office of Appeals, or an examination the IRS opened before January 1, 2025, unless a final determination came before the allocation deadline.

Worked Migration: One Investor, Three Wallets

The example below is hypothetical. The person, dates, prices and wallets are invented, fees are ignored to keep the arithmetic readable, and the prices are illustrations, not market data or forecasts. It follows a taxpayer who completed a specific unit allocation on time, then shows the alternative global allocation she could have adopted instead.

Purchase history (all bitcoin, all capital assets):

Movements before the snapshot:

The snapshot, as of January 1, 2025:

Units of unused basis: Lot B (0.50 BTC, $29,000), Lot C (1.00 BTC, $16,000) and Lot D (0.50 BTC, $31,000). That is 2.00 BTC of unused basis worth $76,000, matching the 2.00 BTC of remaining units. Lot A is gone: its $2,000 is previously identified and used basis because Maya's 2024 return already spent it.

The trap at this step. Tracing the coins, Maya might reason that her hardware wallet "really" holds Lots A and B, so its basis should be $31,000. Section 5.02(7) says any allocation of previously identified and used basis is not reasonable. Pulling Lot A back would count $2,000 of basis twice, once on the 2024 return and once again on a future sale. The safe harbor works only with what was left unspent.

Path 1: the specific unit allocation Maya recorded on February 3, 2025. She had no bitcoin sales or transfers until 2026, so her deadline was the due date of her 2025 return, including any extension.

Each assigned lot keeps its original acquisition date, as section 3.03 requires. Lot B in W2 is still a 2021 acquisition even though those exact coins were never on Exchange Y.

Path 2: the global allocation she could have chosen instead. Suppose that in December 2024 Maya had written this rule in her records: order unused basis by latest acquisition date first, then fill W2, then W3, then W1. Applied, the rule produces:

Both paths place the same $76,000; they differ only in which wallet's sales it offsets. A global rule had to be on paper before January 1, 2025, so it cannot be adopted after the fact.

The Same 2026 Sales Under FIFO and Under Specific Identification

Continue with Path 1. In January 2026, Maya buys Lot E on Exchange Y: 0.25 BTC at a hypothetical $90,000, for $22,500. W2 now holds Lot B 0.25, Lot D 0.50 and Lot E 0.25. In September 2026 she makes three sales at a hypothetical $100,000 per BTC. The IRS's digital assets page sets the holding-period line: more than one year is long-term, one year or less is short-term.

Three things stand out.

First, the method only matters inside a wallet with more than one lot. W3 holds a single lot, so FIFO and specific identification give the same $1,600 of basis. The last row shows what pooled thinking used to produce: under universal FIFO, the earliest unused basis anywhere (Lot B, at $58,000 per BTC) would have been pulled into the phone-wallet sale. Under the per-wallet rule, that basis is locked to W1 and W2, and in this example the W3 gain doubles.

Second, a smaller gain can come with a trade-off: choosing Lot E in W2 cuts the gain to $2,500 but makes it short-term. Which result suits a household depends on its full tax picture, a question for a tax professional.

Third, who holds the identification differs by wallet. For the W2 rows, Maya must give Exchange Y an identification it accepts, using its designated identifiers, by the time of the sale; if it offers only one selection method, that method governs. For W1, a dated note in her own records made before she broadcasts the transaction is the identification, and a note written afterwards is not.

Standing Orders and Broker Accounts: 2025 Versus 2026

Broker accounts had a softer first year. Notice 2025-7, effective December 31, 2024, explains that Treasury and the IRS understood some brokers might not have the technology by January 1, 2025 to accept specific instructions or standing orders. For a relief period running from January 1 to December 31, 2025, it let taxpayers identify broker-held units without telling the broker: either by recording the particular units in their own books by the time of the sale, or by recording a standing order in their own books before the covered units were sold.

The notice applied only to units in a broker's custody, not to unhosted wallets. It also switched off, for those who used the relief, the rule that a broker's single offered method counts as a standing order. And it stated that anyone also relying on Rev. Proc. 2024-28 could use the relief only after meeting that procedure's requirements, including finishing a global allocation if that was the chosen path.

Reliance is limited to the relief period. The IRS FAQs added December 15, 2025 describe the position from 2026 onward:

The IRS digital assets page, last updated September 2, 2026 when we checked, lists Notice 2025-7 among its guidance and shows no later notice extending that relief into 2026. If you read about an extension elsewhere, look for the notice number on irs.gov before relying on it.

If the Allocation Was Never Done

For most individual calendar-year filers, a specific unit allocation had to be completed by the due date of the 2025 return including extensions, or earlier if a disposal of that asset type on or after January 1, 2025 came first. A global allocation also needed its rule written down before January 1, 2025.

What the revenue procedure says about falling short is limited to this: a taxpayer who does not meet its requirements cannot rely on the safe harbor, and section 5.03 adds that the failure "may result in the assessment of additional tax, penalties, and interest." It does not set out a substitute method for allocating pre-2025 basis. We have not found official guidance that fills that gap, and we are not going to guess at one.

What the texts do make clear is narrower and still useful:

If you are in this position, gather your pre-2025 records, wallet balances at the end of 2024, and the basis your 2024 and 2025 returns already used, and take that package to a tax professional before filing for 2026.

Records Worth Keeping From Now On

The IRS's FAQ 95 frames the duty generally: keep records sufficient to establish the positions on your return. For the per-wallet rule, that means records organised by wallet. A working checklist:

That last item is where differences surface. A broker's lot ordering follows its own records. The regulation's Example 4 describes a customer who moved coins between exchanges and gave the receiving broker no purchase information: the units the broker treats as sold are not the units the customer must treat as sold. The IRS broker FAQs add that a broker may use acquisition details a customer supplies for lot ordering only, and may not use them to report the basis of transferred-in assets. Our guide to reading Form 1099-DA and filling in missing basis shows how to reconcile a broker form against your own ledger when they disagree.

Edge Cases and Common Mistakes

Treating a combined seed backup as one wallet. FAQ 96 says a duplicate record of all your keys does not merge wallets. If you want to consolidate, the units actually have to move, and the move itself has fee consequences. The seed phrase backup checklist is about security, not tax consolidation.

Identifying too late. For self-custody, the note must exist no later than the date and time of the sale. For a broker account, the broker must have the instruction by then. Reconstructing a choice at tax time is not an identification under either paragraph.

Forgetting the fee units. In a crypto-to-crypto trade where the broker keeps part of the incoming asset as its fee, those withheld units come from the units received, regardless of your standing order.

Mixing asset types. Basis from ether cannot be allocated to bitcoin. Each type stands alone, both for the safe harbor and for ongoing identification.

Assuming a selection method is locked in. Under Reg. 1.1012-1(j)(4), switching from, say, earliest-acquired to highest-basis is not a change in accounting method, so sections 446 and 481 do not apply. A broker that offers only one method still binds you for that account, though.

Gifts follow the same ordering. Rev. Proc. 2024-28's Example 5 reaches the same FIFO result for units given to a family member that Example 4 reaches for units sold. The identification rules in the regulation cover units "sold, disposed of, or transferred," not sales alone.

A Practical Next Step

If the worked example made you realise your exchange account and your hardware wallet carry very different basis, the next question is what that exchange will report to the IRS for your 2026 sales. Our walk-through of Form 1099-DA, box by box explains which sales arrive with basis filled in and which arrive blank, so you can see where your own per-wallet ledger will need to carry the numbers. For the rest of the topic cluster, the crypto taxes hub collects our US, UK and Canada guides in one place.

Frequently Asked Questions

Do I have to track crypto cost basis per wallet now?

Yes, for US federal income tax purposes. Treas. Reg. 1.1012-1(j) applies to all acquisitions and dispositions of digital assets on or after January 1, 2025, and it identifies the units sold within the specific wallet or broker account they leave. Pre-2025 transactions remain under the older IRS FAQ guidance.

What was the Rev. Proc. 2024-28 safe harbor?

It was a one-time method for assigning the unused basis you held as of January 1, 2025 to the wallets and accounts holding the same number of units, per type of digital asset. It offered a specific unit allocation or a global allocation, each with its own deadline, and the allocation is irrevocable. It does not establish how much basis you have; that still needs separate records.

Is the Rev. Proc. 2024-28 deadline still open in late 2026?

For most individuals, no. A specific unit allocation had to be completed before the earlier of the first disposal of that asset type on or after January 1, 2025 or the due date, including extensions, of the 2025 return, and a global allocation needed its method written down before January 1, 2025. The procedure does not describe what applies instead if you missed it, so that question belongs with a tax professional.

What happens if I do not identify which coins I sold in 2026?

FIFO applies within that wallet or broker account: the earliest-acquired units held there are treated as sold. The date the coins were transferred into that wallet or account is ignored, so their original purchase date controls. FIFO is never applied across all your wallets at once for these transactions.

Can I still record a standing order in my own notes for an exchange account?

Not for sales after December 31, 2025. That option came from Notice 2025-7, whose relief period covered 2025 only. For 2026 sales, the IRS FAQs say the standing order must be in place with the broker and use identifiers the broker designates, and a broker that offers only one method makes that method your standing order.

Does sending crypto between my own wallets trigger tax under the per-wallet rule?

The IRS treats a transfer between wallets or accounts you own as non-taxable, except for any crypto used or withheld to pay the transfer fee, which is a disposal. What the per-wallet rule changes is the record-keeping: the units carry their original basis and acquisition date into the new wallet, and you need records showing which units moved.

Sources

CryptosEyes publishes general educational research, not investment, legal, or tax advice. The worked example uses invented figures to show how the rules operate, and tax outcomes depend on facts this page cannot see. Before choosing an identification method, making or relying on a basis allocation, or filing a return, consult a qualified tax professional.