What is safe harbor allocation?

A one-time procedure under which a United States taxpayer assigned their unused digital asset basis to specific wallets and accounts as of January 1, 2025, so later disposals could be tracked account by account.

Internal Revenue Service Revenue Procedure 2024-28 provides the safe harbor under section 1012(c)(1) and sets out how the allocation had to be made. It exists because many taxpayers had previously pooled basis across all their holdings, an approach the account-by-account rule no longer permits.

The transition it addresses is a real accounting problem. If you bought the same coin across four exchanges and a hardware wallet over six years, and tracked cost as one pool, the move to per-account tracking requires deciding which purchase belongs where. The safe harbor is the mechanism the Internal Revenue Service provided for making that assignment.

How it works

1. The rule being transitioned to. Basis and holding periods must be tracked per wallet or account rather than pooled across everything a taxpayer holds. See wallet by wallet accounting.
2. The problem. Taxpayers with pooled records had unused basis that was not assigned to any particular account.
3. The allocation. Revenue Procedure 2024-28 permitted a reasonable allocation of that unused basis to the units held in each wallet or account, fixed as of the start of January 1, 2025.
4. Records. The allocation had to be made and documented by the deadline in the revenue procedure, and the resulting per-account records govern later disposals.

From that point, selling from a particular account uses that account's basis and holding period. A per-unit identification method such as specific identification operates within the account rather than across a global pool. Method rules including fifo and hifo apply the same way.

This is a United States federal income tax matter and does not describe treatment anywhere else. It is background, not advice; a tax professional should confirm how it applies to any specific situation.

Example

Illustrative. A taxpayer holds 3 BTC total: 1 on one exchange, 1 on another, and 1 in a hardware wallet. Their records show three purchases at $8,000, $30,000, and $60,000, tracked as a pool with no note of which coin sat where.

Under pooled tracking, selling 1 BTC could draw on any of those figures. Under account-by-account tracking, the sale uses the basis assigned to the account it came from, so the allocation made under the safe harbor determines the gain. Assigning the $60,000 purchase to the hardware wallet and later selling from there produces a very different result from assigning the $8,000 purchase there.

The figures are illustrative. What matters is that the assignment, once made, governs.

Why it matters when you buy

Every purchase creates a basis record tied to a specific account, and reconstructing that later from exchange exports is far harder than recording it at the time. Keeping per-account records from the first buy is the practical takeaway. Crypto tax basics covers the general approach and the tax pages cover holding periods by jurisdiction.

Related terms

wallet by wallet accounting — the rule this transitions to; cost basis — what is being allocated; cost basis method — how units are matched on sale; specific identification — identifying units within an account; form 1099 da — broker reporting of disposals; taxable event — what triggers the calculation.

Questions

Does this apply outside the United States?

No. It is a United States federal income tax procedure. Other jurisdictions have their own rules, some of which pool cost across holdings rather than separating by account.

Can I still make an allocation under it?

No. The revenue procedure set a fixed date and deadline that have passed. If your records are incomplete, that is a matter to raise with a tax professional rather than something the safe harbor now solves.

Why did the rules change to per-account tracking?

Because broker reporting is per account. Aligning the taxpayer's records with what brokers report makes disposals reconcilable, which is also why per-account records are worth keeping from the start.