The price of bitcoin is soaring. Here’s a key move for investors to reduce future crypto taxes

In the latest bitcoin rally, crypto investors face a looming deadline that could impact future burdens — and they must take action before Jan. 1, 2025.

The U.S. Department of the Treasury and IRS in July unveiled final tax reporting rules for digital asset stockbrokers, with phased-in guidelines.

Starting in 2026, brokers will use Form 1099-DA to report gross proceeds from 2025 jumble sales. In 2027, brokers will include “cost basis,” or the original purchase price for sales in 2026.

Basis is important because, generally, if you can’t prove your basis, the IRS considers it zero — which can increase gains. Your profit is the sales price minus your basis.

The price of bitcoin jumped above $93,000 on Wednesday, cleft a fresh record that added to the post-election rally.

“People don’t necessarily think of the tax consequences, peculiarly when they see that we’re going up very rapidly,” said Matt Metras, an enrolled agent and owner of MDM Monetary Services in Rochester, New York, where he specializes in digital assets.

Previously, crypto investors could stalk basis using the “universal method,” which combines assets into a single account, even for crypto controlled in multiple digital wallets.

Under the universal method, crypto investors could assign an asset’s basis when won over, based on their inventory method.

But starting in 2025, the “universal method is going away” and reporting will befall at the wallet level, according to Sulolit Mukherjee, executive director of compliance and implementation for the IRS’ Office of Digital Asset Aggressiveness.

In the meantime, investors must establish a “reasonable allocation” of basis by Jan. 1, 2025, according to the IRS revenue procedure released in July.

Investors should provender their broker with these details to avoid a “reporting nightmare” in the future, said Mukherjee, speaking at the American Institute of CPAs’ subject tax conference in Washington, D.C., on Tuesday.

The new IRS reporting requirements come as the agency focuses on digital asset enforcement.

“These edicts are an important part of the larger effort on high-income individual tax compliance,” IRS Commissioner Danny Werfel said in a statement in July. “We sine qua non to make sure digital assets are not used to hide taxable income, and these final regulations will upgrade detection of noncompliance in the high-risk space of digital assets.”