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What is cost basis?
Cost basis is what an asset cost you for tax purposes. For crypto you bought, the IRS says it is the amount you spent in U.S. dollars, including fees, commissions and other acquisition costs. Your gain or loss on a sale is measured against it.
What it means for you
Without records of what you paid and when, you cannot show your basis. The IRS lets you choose which units you sold only if you can identify them and substantiate their basis; otherwise units are treated as sold first in, first out, and since 1 January 2025 that applies within each wallet or account, not across all of them. Coins received as pay, from a fork or as a gift follow their own basis rules.
How it works
In the US, basis for purchased crypto is the dollars spent including fees; for crypto received as pay, from a hard fork or an airdrop, it is the fair market value included in income when received; for a gift, it generally carries over the giver's basis. Gain or loss is the sale amount minus basis, and holding more than one year makes it long-term. Since 1 January 2025, IRS regulations apply specific identification or first-in-first-out within each wallet or account separately, rather than across all of a person's wallets; Rev. Proc. 2024-28 gave a one-time way to allocate older basis to wallets on that date.
An example
Say you bought 1 coin for 1,000 dollars plus a 10-dollar fee, then sold it for 1,500 dollars. Your basis is 1,010, so the gain measured against it is 490 dollars.
Sources: IRS: Frequently asked questions on virtual currency transactions, IRS: Rev. Proc. 2024-28, allocating digital asset basis to wallets or accounts on January 1, 2025 · checked 4 October 2026
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