What is cost basis?

The original value of an asset for tax purposes, usually the purchase price plus fees.

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The original value of an asset for tax purposes, usually the purchase price plus fees.

Your taxable gain or loss is the sale price minus cost basis, so basis is half of every disposal calculation and the half nobody records properly at the time. Tracking it across multiple exchanges and wallets is the main practical difficulty in crypto tax reporting.

The failure mode is specific and expensive. Coins withdrawn from one exchange and later deposited to another arrive with no basis attached. If you cannot document what you paid, the safe assumption a filing system makes is a basis of zero, which taxes the entire proceeds as gain.

How it works

For a purchase, basis is what you paid in your home currency plus acquisition costs such as trading and deposit fees. The IRS states that the basis of a digital asset is generally its cost in United States dollars (source: IRS digital assets guidance).

Assets not bought have other rules. Crypto received as payment for work or goods takes a basis equal to its fair market value when received, which is also the amount reported as income. Mining and staking rewards work the same way, so the income you declare on receipt becomes the basis you subtract on disposal, and forgetting that second step means paying tax twice on the same value.

Fees cut both ways. Acquisition fees increase basis and therefore reduce the eventual gain. Disposal fees reduce proceeds. In both cases they are working in your favor, provided you recorded them.

United States reporting is changing what your broker tells you. Custodial brokers began reporting gross proceeds on Form 1099-DA for transactions from 1 January 2025, with basis reporting phasing in for transactions after 1 January 2026 (source: IRS digital assets guidance). Until basis reporting is complete, a form showing proceeds with no basis is not evidence that your basis is zero.

Basis is now generally tracked per wallet and per account in the United States rather than pooled across everything you hold. See wallet by wallet accounting.

Example

Illustrative. You buy 0.2 ETH for 600 dollars and pay a 3 dollar trading fee, so the basis is 603 dollars. You later sell for 900 dollars with a 4 dollar fee, so proceeds are 896 dollars and the gain is 293 dollars. Had you ignored both fees, you would report a 300 dollar gain, overstating it by 7 dollars on a single small trade. Across a hundred trades, that error compounds into a meaningful overstatement, all of it avoidable with the exchange's own transaction export.

Why it matters when you buy

Basis is set at purchase and cannot be reconstructed convincingly afterwards, so exporting your transaction history from each venue while you still have the account is the cheapest tax work available. Fees paid at purchase, shown on the fee comparison, form part of the basis, and the tax pages cover how each jurisdiction treats a disposal.

cost basis method — which lot a sale is matched against; capital gains — what basis is subtracted from; tax lot — one purchase with its own basis; form 1099 da — what United States brokers now report; taxable event — when the calculation is triggered.

Questions

What if I have no record of what I paid?

You reconstruct it from exchange exports, bank statements, and blockchain history, and document the method you used. An undocumented basis risks being treated as zero, which taxes the full proceeds as gain.

Do fees count?

Acquisition fees generally add to basis and disposal fees generally reduce proceeds, both of which lower your reported gain. Keep the fee figures from your exchange export rather than estimating them.

Does staking income create basis?

Yes. Rewards are usually income at their value on receipt, and that same value becomes the basis of the coins received, so it is subtracted when you later dispose of them.

Guides that use this term

  • Crypto Estate Planning: Making Sure Your Coins Aren't Lost With You

    Passing on cryptocurrency requires two things that an ordinary will does not provide on its own, a record of what exists and where, and a route by which the person inheriting it can reach the keys, because no court order can recover a seed phrase nobody wrote down.

  • Crypto Tax in Canada: How the CRA Treats Cryptocurrency

    In Canada a crypto disposal produces either a capital gain or business income, and where it is a capital gain the Income Tax Act makes one half of that gain taxable and adds it to your income for the year at your marginal rate.

  • Crypto Tax in the United Kingdom: Capital Gains, Income, and Reporting

    In the United Kingdom you pay Capital Gains Tax when you dispose of cryptoassets by selling them, exchanging them for a different cryptoasset, spending them, or giving them away, and you pay Income Tax on tokens you receive from activities such as staking, with gains above the annual tax-free allowance reported through Self Assessment.

  • Recurring Buys on Exchanges: How They Work and What They Cost

    A recurring buy is a standing instruction that tells an exchange to purchase a fixed amount of an asset on a schedule, funded either from your cash balance or by pulling from a linked bank account, and it is usually priced as a separate product at a higher rate than the same order placed by hand.

  • Crypto Tax Basics: What Triggers a Taxable Event

    A taxable event happens when you dispose of crypto or receive it as income, so selling for cash, swapping one token for another, spending it, and receiving staking rewards or an airdrop are all reportable, while buying and simply holding is not.