Cost basis is what you paid for an asset, including fees, adjusted for later events such as splits, returns of capital, or wash sales. Gain or loss on a sale is proceeds minus basis. In crypto, basis has to follow each unit from the exchange where it was bought, through every wallet it touched, to the platform where it was sold.
Basis is the number the IRS will treat as zero if you cannot prove otherwise, and in crypto it is the number most likely to be lost. Every transfer between wallets, every exchange that shut down, every bridge to another chain is a place the record breaks. Brokers now report proceeds on Form 1099-DA, but for anything transferred in they report no basis, so the difference between a correct return and a return that taxes your entire sale as profit is the basis record you keep.
| How you got it | Basis | Holding period starts |
|---|---|---|
| Bought with dollars | Price paid plus fees | Day after purchase |
| Swapped from another coin | Fair market value of what you received | Day after the swap |
| Staking, airdrop, mining, payment | Value reported as income when received | Day after receipt |
| Gift from a living person | Giver's basis carries over | Giver's holding period carries over |
| Inheritance | Fair market value at date of death | Automatically long-term |
| Transfer between your own wallets | Unchanged | Unchanged |
The dollar amount you paid for a coin, including fees, or the value you reported as income if you earned it. It is the starting point for calculating gain or loss when you sell, swap, or spend.
Yes. Purchase fees are added to basis and selling fees reduce proceeds. A fee paid in crypto is itself a small disposal of that crypto at fair market value.
The IRS default is zero, which taxes the entire sale as gain. Reconstruction from exchange exports, block explorers, and bank records is usually possible; the cost of reconstruction is almost always less than the tax on a zero basis.
No. Transfers between your own wallets keep the original basis and holding period. What changes is that the receiving wallet now holds that lot, and identification of which lot you sell happens within that wallet.
The basis of each reward is its fair market value on the day you gained control of it, which is the same amount you reported as ordinary income that year.
If your basis is scattered across platforms, or an exchange you used has closed, the record can still be rebuilt. Multi-year crypto catch-up and cost basis reconstruction pulls history from exports and the blockchain, matches every transfer, and documents the method so it holds up if the IRS asks. Bring whatever you have; the gaps are the job.
Last reviewed September 17, 2026. Tax rules change; confirm current law before acting.
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