Despite the approval of a new standard in 2009, JPEG-extended range lossless, current digital products still employ previous standards for lossless image compression, such as JPEG, JPEG2000, JPEG-LS, etc. Wavelet-based codecs can provide abundant functionalities and excellent compression efficiency. Among them, the backward coding of wavelet trees (BCWT) algorithm offers lower complexity and consumes less internal buffer memory without sacrificing quality at similar compression ratios (CR) when compared to other wavelet-based codecs, such as JPEG2000 and set partitioning in hierarchical trees (SPIHT). A line-based BCWT was developed for further reduction of internal buffer memory. A very efficient line-based lossless BCWT compression algorithm is presented. Lossless color and lossless wavelet transform are employed and the original BCWT algorithm is modified for lossless operation, including incorporation of adaptive arithmetic coding. In order to eliminate coding redundancies, a set to zeros method and a zero tree detection algorithm are proposed, which significantly enhance the boundary condition CR performance while reserving the algorithm’s advantages. Tests and analysis results show that the lossless BCWT algorithm requires less memory and computational resources than SPIHT and JPEG2000, while retaining image quality comparable to the standard image codecs, therefore, lossless BCWT is quite suitable for implementation in modern digital technologies.