Davit Cho
Global Asset Strategist & Crypto Tax Compliance Expert
π Verified Against: IRS Final Regulations (TD 10000), Revenue Procedure 2024-28, CoinTracker 2026 Tax Guide, Fidelity Digital Assets Report
π
Published: February 13, 2026 | Last Updated: February 13, 2026
✉️ Contact: davitchh@proton.me
⚡ 13+ years experience in Global Asset Strategy & International Tax Enforcement
Per-Wallet Cost Basis 2026: The New IRS Rule That Changes Everything for Crypto Investors
On January 1, 2025, the IRS quietly ended the most popular method of tracking crypto cost basis. If you missed it, you're already behind — and the consequences hit your 2025 tax return filed this April.
The "Universal Method" is dead. Per-wallet cost basis tracking is now mandatory.
Under Revenue Procedure 2024-28, the IRS now requires every crypto investor to calculate cost basis separately for each wallet and exchange — Coinbase, Kraken, MetaMask, Ledger, Binance — each one is its own isolated cost basis universe.
If you don't designate which specific units you're selling at the time of each transaction, the IRS defaults to FIFO (First-In, First-Out) — which in a market where Bitcoin has crashed from $109,000 to ~$66,000, means you're selling your cheapest coins first and paying maximum taxes on gains that barely exist.
π¨ Critical Deadline: February 17, 2026
U.S. crypto brokers must send you Form 1099-DA by February 17, 2026 — just 4 days from now. This is the first year this form exists. For 2025 transactions, it reports gross proceeds only. Starting January 1, 2026, brokers will also report cost basis — and if you haven't set up per-wallet tracking, the broker defaults to FIFO, potentially inflating your taxable gains by thousands.
Source: IRS Newsroom — Reminders for Taxpayers About Digital Assets (January 28, 2026)
This guide is the complete migration playbook: what changed, why it costs you money, how to switch to Specific Identification (HIFO) before each sale, and the exact software setup to stay compliant. As of February 13, 2026, Bitcoin is trading at approximately $66,000 — down 48% from its all-time high of $109,000 — making cost basis strategy more critical than ever.
π Table of Contents
- → Section 1: What Changed — Universal Method Is Dead
- → Section 2: Per-Wallet Cost Basis Explained (With Examples)
- → Section 3: Universal vs Per-Wallet — Before & After Comparison
- → Section 4: The FIFO Trap — How Default Rules Cost You Thousands
- → Section 5: Step-by-Step Migration Guide (Rev. Proc. 2024-28)
- → Section 6: Crypto Tax Software Comparison for Per-Wallet Tracking
- → Section 7: The 1099-DA Connection — What Brokers Report in 2026
- → Section 8: 7 Common Mistakes That Trigger IRS Audits
- → Section 9: FAQ — 20 Critical Questions Answered
Section 1: What Changed — Universal Method Is Dead
Before January 1, 2025, most crypto investors used the "Universal Method" — a single pool of cost basis across all wallets and exchanges. If you bought 1 BTC on Coinbase for $30,000 and another 1 BTC on Kraken for $60,000, the Universal Method treated them as one pool with an average basis of $45,000 per BTC.
That's over.
Under IRS Final Regulations (Treasury Decision 10000) published June 28, 2024, and Revenue Procedure 2024-28 released the same day, the IRS mandated that starting January 1, 2025:
- Cost basis must be tracked separately per wallet and per exchange account
- The Universal Method (pooling across wallets) is no longer permitted
- If you don't specify which units you're selling, the IRS applies FIFO by default within each wallet
- Taxpayers had until December 31, 2024 to use the Safe Harbor provision to allocate existing "unused basis" across wallets
⚠️ If You Missed the December 31, 2024 Safe Harbor Deadline
You're not out of options — but you've lost the ability to choose how to allocate your existing basis. The IRS will default to FIFO within each wallet for all pre-2025 holdings. This could mean higher taxes if your oldest purchases have the lowest basis. Consult a crypto-specialized CPA immediately if you have significant holdings across multiple wallets.
Section 2: Per-Wallet Cost Basis Explained (With Examples)
Under the new per-wallet system, every wallet and exchange account is treated as an isolated tax lot universe. Here's what that means in practice:
π Example: Sarah's 3-Wallet BTC Portfolio
| Wallet/Exchange | BTC Held | Purchase Price | Cost Basis per BTC |
|---|---|---|---|
| Coinbase | 0.5 BTC | Bought at $30,000 (2022) | $30,000 |
| Kraken | 0.5 BTC | Bought at $95,000 (Jan 2025) | $95,000 |
| Ledger (Hardware) | 1.0 BTC | Transferred from Coinbase (originally $30,000) | $30,000 |
Old Universal Method: Sarah's total pool = 2 BTC with blended average basis of $46,250 per BTC. If she sells 0.5 BTC at $66,000, gain = $19,750.
New Per-Wallet Method: If Sarah sells 0.5 BTC from Coinbase, basis = $30,000, gain = $36,000. If she sells 0.5 BTC from Kraken, basis = $95,000, loss = -$29,000.
π‘ The Strategic Insight
Under per-wallet rules, which wallet you sell from completely changes your tax outcome. Selling from Kraken generates a $29,000 tax loss. Selling from Coinbase creates a $36,000 taxable gain. Same asset, same sale price — wildly different tax results. This is why per-wallet awareness is now critical for every single crypto sale.
Section 3: Universal vs Per-Wallet — Before & After Comparison
| Factor | Universal Method (Before 2025) | Per-Wallet Method (2025+) |
|---|---|---|
| Cost Basis Pool | All wallets merged into one pool | Each wallet/exchange = separate pool |
| FIFO Default | Applied across all holdings globally | Applied within each individual wallet |
| Specific ID (HIFO) | Pick any lot from any wallet | Can only pick lots within the selling wallet |
| Transfer Between Wallets | No tax impact (same pool) | Cost basis must travel with the asset |
| Complexity | Low — one spreadsheet | High — requires software per wallet |
| Tax Optimization | Easier to cherry-pick lots | Requires pre-sale planning per wallet |
| IRS Authority | Permitted until Dec 31, 2024 | Rev. Proc. 2024-28 + TD 10000 |
Section 4: The FIFO Trap — How Default Rules Cost You Thousands
FIFO (First-In, First-Out) is the IRS default if you don't specifically identify which units you're selling. Under FIFO, the oldest units in each wallet are sold first — and for most crypto investors who started buying in 2020-2022, those are the cheapest units, meaning maximum taxable gains.
π° Real Example: The FIFO Tax Penalty
Scenario: Mike holds 2 BTC on Coinbase. He sells 1 BTC on February 13, 2026 at $66,000.
| Lot | Purchase Date | Cost Basis | Sale Price | Gain / Loss |
|---|---|---|---|---|
| Lot A (FIFO Default) | March 2021 | $35,000 | $66,000 | +$31,000 gain |
| Lot B (Specific ID / HIFO) | October 2025 | $109,000 | $66,000 | -$43,000 loss |
π¨ The $74,000 Swing
FIFO default = $31,000 taxable gain → at 37% bracket = $11,470 in taxes owed
Specific ID (HIFO) = $43,000 deductible loss → offsets other gains + $3,000 ordinary income deduction → potential $15,910 in tax savings
Total swing: $27,380 in real tax dollars — just by choosing which lot to sell. Same BTC. Same sale price. Different lot = completely different tax outcome.
According to CoinTracker's 2026 tax guide, taxpayers who use Specific Identification (HIFO) instead of FIFO save an average of $5,600 per year in crypto taxes. For high-volume traders, the savings can exceed $50,000 annually.
Section 5: Step-by-Step Migration Guide (Rev. Proc. 2024-28)
Whether you used the Safe Harbor before December 31, 2024 or not, here's the complete workflow for filing your 2025 taxes correctly under the new per-wallet rules:
✅ Step 1: Inventory Every Wallet and Exchange Account
List every location where you hold or held crypto in 2025. This includes centralized exchanges (Coinbase, Kraken, Gemini, Binance.US), foreign exchanges (Binance.com, Bybit, OKX), hardware wallets (Ledger, Trezor), software wallets (MetaMask, Phantom, Trust Wallet), and DeFi protocols where you deposited or staked tokens.
✅ Step 2: Export Full Transaction History From Each Wallet
For each exchange, download the complete 2025 transaction CSV. For self-custody wallets, export from the relevant block explorer (Etherscan, Solscan, Blockchain.com). Include all trades, swaps, staking rewards, airdrops, and transfers.
✅ Step 3: Import Into Per-Wallet-Compatible Tax Software
Use software that supports per-wallet cost basis tracking. Import each wallet separately. The software must maintain isolated cost pools per wallet — not merge them.
✅ Step 4: Choose Your Cost Basis Method Per Wallet
For each wallet, you can choose:
| Method | How It Works | Best For | Tax Impact |
|---|---|---|---|
| FIFO (Default) | Sell oldest units first | Almost no one — worst for tax efficiency | Highest taxes (sells cheapest lots first) |
| HIFO (via Spec-ID) | Sell highest-cost units first | Most investors — minimizes gains | Lowest taxes (sells most expensive lots first) |
| LIFO | Sell newest units first | Short-term loss harvesting | Varies — good in rising markets |
| Specific Identification | Choose exact lot per trade | Advanced traders, CPAs | Maximum flexibility |
✅ Step 5: Track Transfers Between Wallets
When you transfer crypto from one wallet to another (e.g., Coinbase → Ledger), the cost basis must travel with the asset. A transfer is not a taxable event, but you must document the cost basis of each unit transferred. This is the #1 area where investors make mistakes under the new rules.
✅ Step 6: Generate Form 8949 and Schedule D
Your crypto tax software will generate Form 8949 (individual transactions) and Schedule D (summary). For 2025 returns, use Box C (short-term, no 1099-DA) or Box F (long-term, no 1099-DA) for foreign exchange and self-custody wallet transactions. For U.S. exchange transactions where you received a 1099-DA, use Box A or Box D.
✅ Step 7: Reconcile Against 1099-DA (If Received)
Starting February 17, 2026, U.S. brokers will send Form 1099-DA. For 2025 transactions, this form reports gross proceeds only (not cost basis). Compare this against your own calculations. If there's a discrepancy, attach an explanation statement to your return.
π‘ Pro Tip: The "Covered vs Uncovered" Distinction
Starting January 1, 2026, crypto purchased and held within the same broker account becomes a "covered security." Brokers must then report cost basis to the IRS. Any crypto acquired before 2026, or held in a different wallet from where it was purchased, is "uncovered" — meaning you are responsible for calculating and reporting cost basis. This distinction becomes critical for your 2026 transactions (filed in 2027).
Section 6: Crypto Tax Software Comparison for Per-Wallet Tracking
Not all crypto tax software handles per-wallet tracking correctly. Here's the 2026 comparison focused specifically on Rev. Proc. 2024-28 compliance:
| Software | Per-Wallet Tracking? | HIFO Support? | Transfer Basis Tracking? | Pricing (2026) |
|---|---|---|---|---|
| CoinTracker | ✓ YES (Native) | ✓ YES | ✓ YES | $59–$1,999/yr |
| Koinly | ✓ YES (Updated) | ✓ YES | ✓ YES | $49–$999/yr |
| CoinLedger | ✓ YES (Updated) | ✓ YES | ✓ YES | $49–$299/yr |
| TaxBit | ✓ YES | ⚠ Limited | ✓ YES | $50–$500/yr |
| Awaken Tax | ✓ YES | ✓ YES | ✓ YES | $99–$599/yr |
π‘ Our Recommendation
For most investors: CoinTracker or Koinly — both have native per-wallet tracking, HIFO support, and handle transfer basis correctly. Koinly is slightly cheaper; CoinTracker integrates better with TurboTax.
For DeFi-heavy users: Koinly or Awaken Tax — better at parsing complex DeFi interactions (liquidity pools, yield farming, cross-chain bridges).
For high-volume traders (1,000+ transactions): CoinTracker Ultra or TaxBit Enterprise — built for scale and CPA collaboration.
Section 7: The 1099-DA Connection — What Brokers Report in 2026
Form 1099-DA is the IRS's new weapon for crypto tax enforcement, and it's directly linked to the per-wallet cost basis rule. Here's the timeline:
| Tax Year | Form Sent | What Brokers Report | Your Action |
|---|---|---|---|
| 2025 (Current) | By Feb 17, 2026 | Gross proceeds ONLY (no cost basis) | Self-calculate cost basis per wallet |
| 2026 (Next Year) | By Feb 2027 | Gross proceeds + Cost basis (covered assets only) | Reconcile broker basis with your records |
| 2027+ (CARF Era) | By Feb 2028 | All data + Foreign exchange auto-reporting | Full reconciliation across domestic + foreign |
⚠️ The 1099-DA Cost Basis Trap for 2026
Starting January 1, 2026, brokers will default to FIFO for cost basis reporting on covered assets unless you explicitly tell them otherwise. If you don't log into Coinbase, Kraken, or Gemini before your first 2026 sale and select "Specific Identification" as your accounting method, the broker will lock in FIFO — and the 1099-DA sent to the IRS will reflect FIFO calculations. Correcting this after the fact is extremely difficult.
Section 8: 7 Common Mistakes That Trigger IRS Audits
These are the most frequent errors IRS agents flag when reviewing crypto returns under the new per-wallet rules:
❌ Mistake #1: Still Using Universal Method for 2025 Returns
The Universal Method ended December 31, 2024. Filing your 2025 return with pooled cross-wallet basis is non-compliant and will trigger a mismatch if the IRS compares your return against broker-reported data.
❌ Mistake #2: Not Tracking Basis on Wallet-to-Wallet Transfers
When you move BTC from Coinbase to Ledger, the cost basis must follow. If your Ledger shows $0 basis because you didn't track the transfer, you'll report 100% of the sale as gain — massively overpaying taxes.
❌ Mistake #3: Ignoring Foreign Exchange Transactions
Binance.com, Bybit, and OKX don't send 1099-DA, but the IRS can trace your transactions via blockchain analytics. Every foreign exchange transaction requires self-reporting on Form 8949 with per-wallet basis calculated independently.
❌ Mistake #4: Defaulting to FIFO Without Realizing It
If you don't explicitly select Specific Identification (HIFO) before each sale, the IRS applies FIFO. For someone who bought BTC at $20,000 in 2022 and $100,000 in 2025, FIFO sells the $20,000 lot first — creating a taxable gain even if the current price is below your latest purchase.
❌ Mistake #5: Missing Staking, Airdrop, and DeFi Income
Staking rewards and airdrops received in any wallet have a cost basis equal to their fair market value at the time of receipt. These must be tracked per wallet as ordinary income — and then separately as capital gain/loss when sold.
❌ Mistake #6: Inconsistent Method Across Tax Years
If you used FIFO in 2024 but switch to HIFO in 2025 without proper documentation, the IRS may challenge your basis calculations. Maintain a written record of your chosen method for each wallet, each year.
❌ Mistake #7: Not Reconciling 1099-DA With Self-Calculated Basis
When your 1099-DA arrives (by Feb 17), compare the gross proceeds figure against your crypto tax software output. Any mismatch — even small — can auto-flag your return in the IRS matching system.
Section 9: FAQ — 20 Critical Questions Answered
❓ Q1: What is per-wallet cost basis?
It means you must calculate cost basis separately for each wallet and exchange account. BTC on Coinbase has one basis; BTC on Ledger has another — even if it's the same Bitcoin.
❓ Q2: When did the Universal Method end?
December 31, 2024. Starting January 1, 2025, per-wallet tracking is mandatory under Rev. Proc. 2024-28.
❓ Q3: What is the Safe Harbor, and is it too late?
The Safe Harbor allowed you to allocate existing "unused basis" across your wallets by December 31, 2024. If you missed it, the IRS defaults to FIFO within each wallet for pre-2025 holdings.
❓ Q4: What happens if I don't specify which lot I'm selling?
The IRS applies FIFO — the oldest lot in that specific wallet is sold first. In a crash market, this typically means selling your cheapest lots and paying maximum taxes on gains.
❓ Q5: Can I use HIFO for crypto?
HIFO (Highest-In, First-Out) is a form of Specific Identification. The IRS allows Specific Identification if you designate the specific units being sold at or before the time of the transaction. Most crypto tax software does this automatically when you select HIFO.
❓ Q6: Does a wallet-to-wallet transfer trigger taxes?
No. Transfers between your own wallets are not taxable events. However, the cost basis must travel with the asset, and you must document the transfer to avoid losing basis information.
❓ Q7: How do I track basis on DeFi protocols?
DeFi interactions (swaps on Uniswap, deposits into Aave, LP token minting) each create separate taxable events. Your DeFi wallet address is a separate cost basis pool. Use Koinly or Awaken Tax, which have the best DeFi parsing engines.
❓ Q8: What about NFTs — are they per-wallet too?
Yes. NFTs are digital assets and subject to the same per-wallet rules. Each NFT in each wallet has its own cost basis. NFTs are taxed as collectibles at up to 28% for long-term holdings.
❓ Q9: Does the per-wallet rule apply to staking rewards?
Yes. Staking rewards received in a wallet have a cost basis equal to FMV at receipt. That basis is tied to that specific wallet. If you later move staked tokens to another wallet, the basis must follow.
❓ Q10: Can I change my cost basis method mid-year?
You can use different methods for different wallets. However, within a single wallet, you should be consistent throughout the tax year. Document any changes.
❓ Q11: What if my exchange doesn't support Specific ID?
Export your data to a crypto tax tool that does. CoinTracker, Koinly, and CoinLedger all allow you to apply HIFO/Specific ID regardless of what the exchange supports natively.
❓ Q12: How does this affect tax-loss harvesting?
Per-wallet rules make tax-loss harvesting more strategic. You must harvest from the specific wallet that holds the high-basis lots. You can't sell "your overall BTC position at a loss" — you sell specific lots in specific wallets.
❓ Q13: What about crypto in retirement accounts (IRA/401k)?
Crypto held in tax-advantaged retirement accounts (self-directed IRAs) is not subject to annual capital gains reporting. However, distributions are taxed as ordinary income. The per-wallet rule applies to taxable accounts only.
❓ Q14: Does this apply to Bitcoin ETFs (IBIT, FBTC)?
No. Bitcoin ETF shares are treated like stocks and reported on standard 1099-B forms. The per-wallet rule applies to direct crypto holdings only — coins in wallets and exchanges.
❓ Q15: What if I used a spreadsheet — is that acceptable?
Technically yes, if it accurately tracks per-wallet basis with dates, amounts, and lot identification. In practice, the IRS prefers software-generated reports. A spreadsheet with errors is a fast path to audit.
❓ Q16: Do the wash sale rules apply to crypto yet?
As of February 2026, crypto is still exempt from wash sale rules. You can sell BTC at a loss and immediately repurchase. However, Congress may close this loophole. Track legislative changes carefully.
❓ Q17: I have crypto on 10+ exchanges. How do I manage this?
Use CoinTracker or Koinly to import all 10+ exchanges simultaneously. The software maintains separate cost pools automatically. Consolidating to fewer exchanges reduces complexity going forward.
❓ Q18: What's the penalty for incorrect cost basis?
A 20% accuracy-related penalty on the underpayment (26 U.S.C. § 6662). If the IRS determines fraud, the penalty increases to 75%. Good-faith efforts documented with software logs provide strong penalty protection.
❓ Q19: Should I consolidate all crypto into one wallet?
From a tax simplification standpoint, yes — fewer wallets = fewer cost pools to track. From a security standpoint, no — diversification across wallets reduces hack risk. Balance both.
❓ Q20: Where can I read the actual IRS guidance?
Revenue Procedure 2024-28: irs.gov/pub/irs-drop/rp-24-28.pdf
Treasury Decision 10000: IRS Final Regulations for Digital Asset Reporting
IRS Digital Assets Page: irs.gov/filing/digital-assets
⚖️ Legal Disclaimer
This article is provided for educational and informational purposes only and does not constitute legal, tax, or financial advice. Tax laws are complex and change frequently. Davit Cho and LegalMoneyTalk do not provide personalized tax advice. Always consult a qualified CPA, Enrolled Agent, or tax attorney before making tax-related decisions. Information is verified against IRS Rev. Proc. 2024-28, Treasury Decision 10000, CoinTracker and Koinly 2026 guides, and Fidelity Digital Assets reports as of February 13, 2026.
π₯ Essential Crypto Tax Compliance Guides
⚠️ 1099-DA Deadline: February 17, 2026 — 4 Days Left
Your broker is about to send Form 1099-DA to you and the IRS. If your per-wallet cost basis isn't set up, the IRS gets FIFO numbers — and you pay maximum taxes. Act now.
π Read the 1099-DA Survival Guide Now
Questions? Email Davit Cho at davitchh@proton.me
Published: February 13, 2026 | Last Updated: February 13, 2026
