What does the IRS’s 2025 crypto tax relief mean for investors?

The IRS has introduced temporary tax relief for cryptocurrency investors navigating the complexities of centralized exchanges.

The relief aims to mitigate the financial burden of impending tax rules, allowing taxpayers to adjust their strategies and avoid higher bills.

The move reflects an effort to simplify crypto tax compliance for individuals and businesses. It also underscores the IRS’s growing focus on addressing the unique challenges of the cryptocurrency market, which has seen exponential growth in adoption and complexity worldwide.

Crypto tax relief: flexible accounting rules

Beginning in 2025, new IRS rules under Section 6045 will impose stricter requirements for crypto transactions, mandating the use of the FIFO (First-In, First-Out) accounting method unless taxpayers select alternatives like HIFO (Highest-In, First-Out) or Specific Identification (Spec ID).

FIFO often increases taxable gains as it sells the oldest, and often lowest-cost, assets first—a challenge for investors in a rising market.

The temporary relief lets taxpayers bypass this default system during 2025, enabling them to use personal records or tax software to pinpoint specific assets sold.

This change is significant for active traders, especially in bull markets, where FIFO could inflate tax liabilities.

By allowing taxpayers to maintain control over their accounting methods, the IRS is making tax compliance more accessible and less financially punishing.

To capitalize on this relief, crypto investors should ensure their personal records and broker data align, reducing discrepancies during tax filings.

Tax software integration is recommended to simplify this process, especially as the 2026 deadline approaches, when investors must formalize their accounting preferences with brokers.

Without these adjustments, investors risk complications during audits or potential penalties for discrepancies in reporting, which could further increase their tax burden.

New crypto tax compliance

From January 1, 2026, taxpayers must explicitly choose their accounting methods through brokers, or they will be automatically enrolled in the default FIFO system.

This shift highlights the importance of proactive tax strategy planning.

For the 2025 tax year, however, the relief is automatic, requiring no additional forms or declarations.

The United States’ approach to easing crypto tax policies contrasts with other nations, such as Russia, where regulatory frameworks around digital assets are evolving to address economic sanctions.

These differing approaches underline the growing global significance of cryptocurrency and the need for tailored regulatory strategies.

Investors are also advised to monitor the broader implications of these regulations, including potential market volatility as compliance deadlines approach, as it could influence the wider adoption of cryptocurrencies globally.

Investors are encouraged to stay informed on upcoming changes to crypto regulations worldwide, as these developments could influence market strategies and compliance efforts.

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