Got a question on these events and whether their tax treatment has changed over time:
Bridge fees on a token from mainnet to level 2 or vice versa.
Failed mint fees. (I have one transaction in which I have three mint failures of thousands of dollars and one mint success of a thousand dollars in the span of two minutes for the same NFT and same wallet. Am I able to count all of these as part of the same transaction? )
Fees involving transfers from one aspect of an exchange to another. (I have a fee of several hundred dollars to move ETH from kucoin to kucoin margin and vice versa. Am I able to group this as part of the cost basis for the first margin trade?)
Approval fees that are necessary in order to sell a token with a wallet. Could these be grouped with the sale transactions?
Fees to move money from one exchange to another if I am buying a token that is only bought/sold at that second exchange.
Thank you for your time. If you have any sources for each of these also, I would appreciate it. Thank you.
Bridge fees, failed mint fees, transfer (gas) fees, approval fees are all taxable disposals and always have been. You calculate a gain/loss based on the FMV at the time minus the cost basis on the small amount disposed.
These fees can’t be used to reduce taxable gains like transaction/trade fees can.
Prior to 2025, transaction fees were added to the cost basis of the received asset. In 2025 and onward, transaction fees reduce the proceeds of the disposed asset. See post here: https://www.reddit.com/r/CryptoTax/s/chQcdegS8G
Nowhere in the regs does it allude to any of the other fees doing the same, so it’s fairly safe to assume these can’t be used to reduce gains. If you’re looking for sources that explicitly say “approval fees are treated as ____”, then you won’t find it. Rather, it’s what’s not mentioned in the final regs that are linked within the post attached here
This is the best answer you could find for your question ^
"These fees can’t be used to reduce taxable gains like transaction/trade fees can." This is mainly what my question pertains to. Would you explain why you assume these can't be used to reduce gains just because they are not mentioned? Is there a section at the link that outlines other fees that do reduce taxable gains?
You’re asking for sources of a negative. “Where does it say I can’t deduct these”. Your question should be flipped. “Where does it say I can deduct these deduct these (if at all)”, and the answer is no where.
The most compelling argument for the position that these fees are deductible is typically any costs incurred to acquire or prepare an asset for sale are includable in the cost basis. For instance, shipping fees to ship a piece of art from overseas would be includable in the cost basis of the asset.
Some may take the position that gas fees are fees incurred in acquiring an asset or “preparing it for sale”. It’s a bit of a stretch imo but like I said, at the end of the day it’s you vs the auditor so just be ready to defend your position if this your stance.
Looking at Publication 551, in the context of stocks and real estate, there are numerous fees that actually increase cost basis, even legal and accounting fees and installation and testing. It's not just acquiring the asset. They also go into detail about what costs do not increase the basis.
As far as cryptocurrency, being a much younger area that lawmakers are less familiar with, these details are absent as far as what doesn't increase basis and what does increase basis.
The absence of detail that certain costs do increase basis shouldn't be taken as an assumption that they don't, in my opinion, unless there is some elaboration about the costs that do and don't increase basis. Are you aware of any elaboration as far as cryptocurrency goes?
I don't think the stock analogy is very reliable because in stocks, generally, if a stock is available at one brokerage, it's available at others. In those examples I gave, the asset could have only been bought or sold if the costs were incurred. However, I do agree it's clear that if a crypto gets sent from one wallet to another on the same chain, that transaction fee paid for the transfer doesn't reduce taxable income. But there are numerous gray areas.
Sometimes with taxes and gray areas you just go by how likely you think you'll get audited and whether you can intelligently defend your decision.
Personally, I would relate crypto to physical property, and thus you wouldn't be able to add moving expenses to basis if you decide to move some physical property between locations you own. The fees that should adjust basis are only those directly involved in the procurement and disposal of the asset, a bit more direct than the IRS' "Your basis (also known as your “cost basis”) is the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars." On question 8 https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions
So in order to obtain x, keep x, and sell x if you had any fees, you can add to basis. If you did a bunch of optional steps like choosing a third party that charges you fees to move between wallets to do certain trades, well those are additional steps in most currency.
All operational fees (bridge fees, failed mints, transfer gas, approval fees) are taxable disposals. You spent crypto. That alone creates a gain or loss based on FMV minus cost basis of the amount spent.
These fees do not reduce capital gains from a sale or swap. They stand on their own.
Why? Because tax law only allows fee netting when the fee is explicitly part of acquiring or disposing of an asset. Trade fees qualify. Operational fees don’t.
The 2025 change people are confusing this with only affects transaction fees:
Before 2025: added to cost basis of the asset received
2025 onward: reduce proceeds of the asset disposed
That rule does not extend to approvals, failed mints, or transfer gas. They are simply not mentioned in the regs, which is the answer.
Tax treatment isn’t based on “this felt necessary.” It’s based on what the code explicitly allows.
If the fee isn’t inside the trade itself, it doesn’t touch your gain.
That’s why conservative tools keep these fees separate. Not because they’re wrong — but because the IRS left no room to net them.
"Why? Because tax law only allows fee netting when the fee is explicitly part of acquiring or disposing of an asset. Trade fees qualify. Operational fees don’t." source for this?
If you take a look at #8, it's fairly broad. "Your basis (also known as your “cost basis”) is the amount you spent to acquire the virtual currency, including fees, commissions and other acquisition costs in U.S. dollars. " Frequently asked questions on virtual currency transactions | Internal Revenue Service
I emphasize "other acquisition costs."
I didn't say "this felt necessary." What I am talking about are necessary costs in order to buy or sell an asset. (I am also not suggesting that this has changed at all in 2025.)
Do you have a source to quote from for "what the code explicitly allows"?
Shehan from CoinTracker here.
These examples all assume that a swap or trade has been made. They don't tell you how to handle for tax purposes situations like bridge fees, failed mint fees, transfer fees, and approval fees in which it's unclear whether they are part of taxable transactions and so it's unclear whether they reduce taxable income. Transfer fees pretty clearly don't reduce taxable income. But the other cases are unclear unless you know of a source that actually talks about those cases.