What is a crypto tax lot and how the IRS treats it

The IRS treats crypto as property, so each lot's basis and holding period matter when you sell. Buying with dollars creates a lot but is not taxable. Moving crypto between your own wallets usually creates no new lot or tax.

What creates a new crypto tax lot

A lot begins when you acquire units in one purchase or receipt. Buying with dollars creates a lot but is not taxable. A swap is taxable and starts a new lot for what you receive. Crypto income from services, staking, mining, or a hard fork creates a lot at the value received.

How to pick which lot you sold

You can choose which units you sold if your records identify them. This method is specific identification. Document the lots before you file. Without an identification, a default rule decides for you.

What records the IRS expects

The Internal Revenue Code requires records that support your return. Keep the cost basis in US dollars, the acquisition date and time, the number of units, the sale date and proceeds, and the fees paid.

• Cost basis in US dollars
• Acquisition date and time
• Number of units
• Sale date and proceeds
• Fees paid to buy or sell

Which IRS forms report crypto lots

The IRS treats digital assets as property, not currency. Report transactions on your federal return whether or not they produce a gain or loss. Capital sales go on Schedule D and its supporting forms. On Form 1040, answer the digital assets question.

What happens if you do not track lots

The default rule is first in, first out, or FIFO. It treats your oldest units as sold first. Without records, you may not show which units you sold. FIFO can produce a larger gain than a newer, higher-basis lot would.

Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.