IRS issues temporary cryptocurrency tax relief measures to benefit CeFi exchange users in 2025

The U.S. Internal Revenue Service (IRS) has issued a temporary relief measure that is expected to benefit CeFi exchange users in 2025. The relief measure addresses concerns raised by the final version of the custodial broker-dealer Rule 6045, which will take effect on January 1, 2025, requiring the use of the first-in, first-out (FIFO) accounting method for digital assets unless a preferred method such as highest-in, first-out (HIFO) or Spec ID is selected. Cointracker Head of Tax Strategy Shehan Chandrasekera explained the issue, highlighting that “as of January 1, 2025, almost all CeFi brokers are not ready to support Spec ID.” This lack of preparation will force many crypto holders to default to FIFO accounting, potentially triggering higher tax liabilities during asset sales. He described: "In a bull market environment, this can be disastrous for many taxpayers because you will inadvertently sell the earliest purchased assets first (which often have the lowest cost basis) while unknowingly maximizing your capital gains." The IRS's temporary relief allows taxpayers to continue to use their own records or tax software to identify the specific units being sold. The relief period only applies to CeFi transactions from January 1, 2025 to December 31, 2025. After this date, taxpayers will need to formally select an accounting method with their broker. Chandrasekera also stressed the importance of syncing tax software with broker settings. (Bitcoin.com)