South Korea’s Two-Year Crypto Tax Delay to 2029 Resets Cost Basis Rules, Loss Deductions

A two-year delay in taxing income from virtual assets, or cryptocurrencies, until 2029 will also reshape how investors calculate cost basis and use loss deductions. One key implication is that realizing losses before the tax takes effect is not always the better choice from a tax standpoint.

According to Bae, Kim & Lee LLC, if the government’s proposal is enacted as drafted, the reference date for determining the acquisition cost of crypto assets held before taxation begins will shift to Dec. 31, 2028, from Dec. 31, 2026. The recognized acquisition cost would be the higher of the asset’s market value at the end of 2028 and the investor’s actual purchase price.

As a result, valuation gains accumulated through the end of 2028 would be excluded from taxation. If the actual purchase price is higher than the market value at the end of 2028, the actual acquisition cost can be used instead. For example, if an investor bought a crypto asset at 100, its price was 60 at the end of 2028, and it was sold for 65 in 2029, the investor could book a loss of 35 using the original cost of 100.

The treatment of losses would also change. Currently, gains and losses can only be netted within the same tax year. Under the government proposal, losses could be carried forward for up to three subsequent tax years and deducted from future gains.

For example, if an investor records a loss of about $21,700 in 2029 and then posts a gain of about $14,500 in 2030, the basic deduction of about $1,810 would be applied first. The remaining roughly $12,700 could then be offset by the prior loss, reducing taxable income to zero. The unused loss of about $9,050 could be carried forward to 2031 and 2032. Losses realized through sales completed by the end of 2028, however, would not qualify for the carryforward deduction.

That means selling loss-making crypto holdings before the tax regime begins is not necessarily advantageous. Investors need to weigh their actual acquisition cost, the market value at the end of 2028 and the amount of future gains that could be offset when deciding when to sell.

Investors also have plenty to prepare in advance. Bae, Kim & Lee advised them to retain full transaction records for each exchange account and personal wallet, and organize documents so they can verify acquisition dates, quantities, unit prices, fees and exchange rates for overseas trades. For assets acquired between 2026 and 2028 in particular, investors need records that can prove the actual purchase price.

By the end of 2028, investors will also need proof of the balances of the virtual assets they hold at that time. That is because the market price on Dec. 31, 2028, may become the basis for calculating acquisition cost once taxation begins.

Users of overseas exchanges also need to review their reporting obligations for foreign financial accounts, separate from the deferral of crypto income taxation. If the combined month-end balance of reportable overseas accounts exceeds about $362,000 on any single day, the accounts must be reported in June of the following year. Non-custodial personal wallets should be managed separately from overseas exchange accounts.

Investors using staking, airdrops, lending, perpetual futures and stablecoin transactions should also keep separate records on contract structures, the timing of reward receipts, market prices at the time, and deposit, withdrawal and disposal histories. The government plans to establish detailed taxation standards for those transactions by the first half of 2028.

Inheritance and gifts remain taxable regardless of the deferral of income taxation. If an investor holds assets in a personal wallet, materials showing actual ownership, fund flows and valuation data should be organized in advance.

Bae, Kim & Lee emphasized the importance of systematically organizing trading records and proof of acquisition costs during the deferral period. Rather than trying to reconstruct past trades after taxation begins in 2029, investors should start linking and managing data by exchange and wallet now to reduce confusion in future tax calculations and explanation procedures.