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A free scan shows the junk files, broken settings and background clutter dragging Windows down - then fixes them in one click.Free scan · Windows 10 & 11Before selling Bitcoin, make sure you can connect the units you dispose of to their acquisition records, cost basis, and holding period. The IRS identification rules depend on whether the Bitcoin is held by a broker or in an unhosted wallet. This guide covers U.S. federal tax recordkeeping only; the IRS sources cited here do not establish state, local, or non-U.S. tax treatment.
Build the records before you sell
A sale or other taxable disposition needs records linking the Bitcoin disposed of to its acquisition history. A proceeds figure alone cannot establish your gain or loss: you also need the basis and holding period of the units sold. The IRS calls for adequate records and reconciliation across exchanges, wallets, and accounts. The following ledger fields are practical ways to organize that evidence, not an IRS-prescribed checklist.
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- Record the acquisition date and time, Bitcoin amount, transaction price or other basis evidence, and the exchange, account, or wallet involved.
- Keep original confirmations, statements, and transaction records alongside any consolidated ledger.
- Record fees where they appear in your transaction records, and document the basis method you apply.
- Track income events accurately and keep their supporting records separate from purchase records.
For transfers between your own accounts or wallets, preserve the outgoing and incoming records that connect the same Bitcoin movement. That evidence helps distinguish a transfer from a purchase or sale. If you may rely on specific identification for Bitcoin in an unhosted wallet, keep enough detail to establish which units were removed.
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The IRS describes these recordkeeping and reconciliation needs in its September 25, 2025 fact sheet and its digital asset FAQs.
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Identify the Bitcoin units you dispose of
When you dispose of only part of a holding, the IRS rules distinguish broker custody from an unhosted wallet. Specific identification is time-sensitive; choosing a favorable lot after the transaction does not, by itself, satisfy a missed identification deadline.
| Where the Bitcoin is held | How to identify units for a partial disposal | What to retain |
|---|---|---|
| Broker or custodial account | Identify the particular units to the broker no later than the transaction time, using identifiers the broker accepts as sufficiently specific. | Evidence of the identification and records substantiating the selected units, including acquisition history, basis, and holding period. |
| Unhosted wallet | Record the specific units in your own books and records by the sale, disposition, or transfer time. An identifier may include acquisition date and time or purchase price. | Adequate records showing both the identified units and their removal from the wallet. |
If you do not meet the specific-identification requirements, the IRS default for a partial disposal is generally the earliest-acquired units of the same digital asset in the relevant broker account or wallet. For an unhosted wallet, the rule looks to acquisition date regardless of when the units were transferred into that wallet. See IRS digital asset FAQ answers 82–92 for the identification rules.
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Apply the correct timing rule
The broker-held identification rules have a transition around December 31, 2025. Do not carry a temporary rule for 2025 transactions forward into later years.
Broker-held Bitcoin sold or transferred during 2025
IRS FAQ 84 describes temporary relief under Notice 2025-7. For covered 2025 transactions, a taxpayer may record a sufficiently informative standing order in their books and records before the units are sold, disposed of, or transferred without communicating that order to the broker under this relief. This is a 2025-specific allowance; it should not be assumed to apply to transactions after December 31, 2025.
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Broker-held Bitcoin in transactions after December 31, 2025
The IRS describes broker-facing identification or standing instructions subject to stated conditions. The identification or instruction must be in place with the broker by the transaction time and use identifiers the broker accepts as sufficiently specific. Check the broker’s requirements and retain evidence that the instruction was timely and covered the units involved.
Bitcoin in an unhosted wallet
The wallet rule requires you to record the selected units in your own books and records by the transaction, disposition, or transfer time, then retain adequate evidence that those units left the wallet. The broker-specific timing change does not replace this unhosted-wallet recordkeeping requirement.
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Do not treat Form 1099-DA as your basis ledger
Form 1099-DA may report proceeds without providing the acquisition basis needed to calculate gain or loss. The rules differ by transaction year, and even under the later rules not every Bitcoin lot will necessarily have broker-reported basis.
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|---|---|---|
| Sales effected in 2025 | Brokers must generally report gross proceeds; they are not required to report basis. | Use your own acquisition records to calculate basis and reconcile the result with the statement. The 2025 Instructions for Form 1099-DA explain the reporting requirement. |
| Transactions after 2025 | Brokers report gross proceeds. Basis reporting is mandatory for covered digital assets and voluntary for noncovered digital assets. | Do not assume a Bitcoin lot is covered or that its basis will appear on the form. Covered status depends on acquisition and broker-custody conditions in the 2026 Instructions for Form 1099-DA. |
The IRS’s September 25, 2025 fact sheet says most statements for 2025 transactions will not provide basis and advises taxpayers and preparers to calculate it from records. The IRS also explains the form and taxpayer responsibilities in Understanding your Form 1099-DA. A portfolio tracker or tax application can help organize or calculate transactions, but it does not replace the underlying evidence connecting units to their acquisitions.
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Reconcile and report the taxable transaction
- Bring together transaction histories and statements from every exchange, broker, wallet, and account involved.
- Match transfers between your own accounts so they are not mistaken for a purchase or sale; investigate missing or conflicting entries.
- Compare your calculated proceeds and basis with Form 1099-DA and other broker records. Treat reported proceeds as one part of the calculation, not a complete gain figure.
- For an individual return, generally report digital-asset sales and other capital transactions on Form 8949, then summarize capital gains and deductible losses on Form 1040, Schedule D. The IRS describes an exception when a broker provides Form 1099-DA with both proceeds and basis information; follow the applicable form instructions.
Taxable digital-asset transactions remain reportable for the year of the transaction even if you receive no information return. The IRS states in FAQ 108: “You must report income, gain, or loss from all taxable transactions involving digital assets on your federal income tax return for the taxable year of the transaction, regardless of the amount or whether you receive a payee statement or information return.”
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