Crypto cost basis: how to calculate it, and what to do when it is missing

The short answer

Cost basis is what you paid to acquire a digital asset, including the fees you paid to acquire it. When you sell or exchange it, your gain or loss is the amount you received minus your basis. Buy one bitcoin for $40,000 with a $100 fee and sell it for $52,000, and your basis is $40,100 and your gain is $11,900 — not $52,000.

That distinction is the whole point. Digital assets are treated as property under Notice 2014-21, so every sale, exchange, or spend is a disposition that produces gain or loss measured against basis. Without basis, there is no way to compute what you actually owe.

How to calculate it

Four components go into the basis of a unit you are selling:

• What you paid in dollars for that specific unit, at the time you acquired it.
• Acquisition fees — trading commissions and similar costs paid to get the asset. These increase basis and therefore reduce gain.
• How it was acquired, if not by purchase. Assets received as income — mining and staking rewards, payment for services, airdrops — generally take a basis equal to the amount you included in income when you received them.
• Which account held it. Since January 1, 2025, basis is tracked wallet by wallet and account by account rather than as one pooled figure across everything you own.

Choosing which units you sold

If you bought the same asset at different prices, which units you are treated as selling changes your gain. The default rule is first-in, first-out within that account: absent an identification, your earliest-acquired units are treated as sold first.

You can instead identify specific units — but the identification has to be made properly and on time. Under Notice 2026-20, which extends relief first granted in Notice 2025-7 through December 31, 2026, you may identify units held in a broker’s custody in your own books and records — by purchase date and time, by purchase price, or by a standing order recorded before the sale — without communicating that identification to the broker.

The identification has to exist no later than the sale itself. An allocation reconstructed afterwards, when you already know which outcome you would prefer, is not an identification.

One consequence is worth stating plainly: under that notice, the units identified in your books control your tax result even when the broker’s form reports something different. Which is precisely why the IRS warned that broker-reported basis for 2026 transactions may not match your own records.

Why your broker often cannot tell you

Brokers began reporting cost basis on Form 1099-DA for 2026 transactions — but only for covered digital assets. A unit is covered only if it was acquired in an account where the broker provides custodial services and held there until the broker disposes of it.

The practical effect is that a large share of forms will carry proceeds with no basis for years to come. Transfers between platforms break the chain. Exchanges shut down and take their records with them. Each broker sees only its own account.

The zero-basis problem

When the IRS receives a form showing proceeds but no basis, its matching systems can treat the entire proceeds amount as gain. The arithmetic gets ugly fast.

The distortion works on losses too. Sell for $10,000 what you bought for $12,000 and you have a $2,000 loss — but a proceeds-only report can present that same sale as $10,000 of gain. Where your real gains land depends on your bracket and holding period, which our 2026 crypto tax rates guide covers.

The mismatch usually surfaces as a CP2000 notice — the IRS’s document-matching proposal, which is neither a bill nor an audit. Our CP2000 guide walks through it.

If you do not know your basis

Missing basis is a reconstruction problem, not a dead end. The National Taxpayer Advocate has told Congress that record reconstruction is the principal barrier to digital asset compliance, and that taxpayers trying to fix errors lack a clear roadmap. In practice the sources are:

• Exchange exports. Download full transaction history from every platform you have ever used, including ones you no longer trade on.
• Bank and card statements. Fiat moving into an exchange establishes what you spent and when.
• On-chain records. Public ledgers are permanent. A transaction hash fixes the date and the amount even when the platform is gone.
• Your own contemporaneous notes, and any tax software history from prior years.

Then document the method. A reconstructed basis with a written explanation of how you arrived at it is defensible; a round number with nothing behind it is not. Reporting a basis of zero when you genuinely paid something means paying tax you do not owe.

Where basis actually goes on your return

Basis is reported per disposition on Form 8949, which totals into Schedule D. Our guide to reporting Form 1099-DA on your return walks through which boxes go where, and what to do when the form and your records disagree.

If reconciling your history turns up years that were never reported at all, that is a solvable problem with established paths — see unreported crypto.

Common questions

Last updated September 15, 2026

This page is educational and does not constitute tax or legal advice for your specific situation. For questions about your own filings, consult a qualified tax professional.