How does the step-up in basis rule apply to cryptocurrency holdings in 2026?

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In 2026, cryptocurrency held until death receives a step-up in tax basis, meaning its value resets to the fair market value on the date of death, thereby eliminating embedded capital gains for heirs who later sell the assets.

Practical considerations for planning:

• Tax Classification: The IRS continues to classify crypto as property. Under current rules, if you die holding appreciated Bitcoin or Ethereum, the recipient's new cost basis is the asset's price at the moment of death, not your original purchase price.
• Exemption Limits: With the federal estate exemption permanently set at $15,000,000 per individual under the OBBBA, most estates will not face immediate estate taxes. However, the step-up remains critical for minimizing capital gains tax, which can reach 23.8% (including the 3.8% NIIT) on large profits.
• Access Protocols: A valid will is often insufficient because executors may lack private keys. Approximately 21% of US adults hold crypto, yet many lack access documentation. Creating a digital asset inventory and granting specific legal authority via trusts or powers of attorney is essential to prevent assets from being lost forever.
• Alternative Gifting: If you intend to gift crypto during your lifetime, remember the 2026 annual gift exclusion is $19,000 per donee. For significant appreciated assets held for over a year, direct charitable donations provide a full fair market value deduction without triggering capital gains taxes.

If a beneficiary loses access to their private keys or encounters technical issues that make the assets unrecoverable despite valid documentation, consult a digital estate attorney immediately, as these assets may be permanently inaccessible.

admin · 2026-10-25 00:01:27