Key Takeaways
- Centralized exchanges now send Form 1099-DA to both you and the IRS — your crypto activity is much more visible to the government than before.
- You must track cost basis separately for each wallet or exchange, not as one combined pool across accounts.
- Short-term gains are taxed like regular income (up to 37%); holding crypto over one year can reduce your rate to 0%, 15%, or 20%.
- Even if you don't receive a 1099-DA, you are still legally required to report every taxable crypto transaction.
Why 2026 Is a Turning Point for Crypto Taxes
If you bought, sold, or traded cryptocurrency in 2025, this tax season is unlike any before it. For the first time, centralized US exchanges — think Coinbase, Kraken, and similar platforms — are required by law to report your crypto sales to the IRS using a new standardized form called Form 1099-DA.
That means the IRS now gets a copy of your transaction records at the same time you do. The agency can match that data against your tax return, much like it already does with stock sales. This is a major shift from previous years, when crypto reporting was inconsistent and largely honor-system based.
What Is Form 1099-DA — and What Does It Cover?
Form 1099-DA is the IRS's new reporting form for digital asset transactions. For the 2025 tax year (returns filed in spring 2026), covered brokers report your gross proceeds from crypto sales — meaning the total amount you received, not your profit or loss.
Cost basis reporting — the information needed to calculate your actual gain or loss — doesn't get added until the 2026 tax year, with forms going out in early 2027. For now, you are responsible for calculating your own gains and losses using your own records.
There's also a lot the form does not cover:
- DeFi activity — trades on decentralized platforms like Uniswap
- Non-custodial wallet transactions — anything done through a personal wallet you control
- Transfers between your own wallets or exchanges
A Big Rule Change: Tracking Cost Basis Per Wallet
Here's a change that trips up even experienced crypto users. The IRS eliminated what was known as the "universal method" — a system that let you treat all of the same asset across all your wallets as one combined pool for tax purposes.
Under the new rules, you must track cost basis separately by wallet or exchange account. If you bought Bitcoin on Coinbase and also on Robinhood, those are two separate pools with two separate cost bases. You can't mix them together when calculating a gain or loss.
This matters because your tax bill can look very different depending on which specific coins you sold. Good record-keeping — ideally with crypto tax software — is now more important than ever.
- Tools like Koinly, CoinTracker, and TaxBit can help automate this tracking
- Keep records of every purchase: date, amount, price paid, and which platform
- Coinbase has announced it will begin calculating cost basis for customers starting next tax year — but not yet
How Crypto Is Actually Taxed: The Rates
The IRS treats cryptocurrency as property, not currency. That means every time you sell, trade, or spend crypto, it's a taxable event — just like selling a stock. Here's how the rates break down:
| Holding Period | Tax Type | Rates for 2026 |
|---|---|---|
| Less than 1 year | Short-term capital gain | Same as ordinary income: up to 37% |
| More than 1 year | Long-term capital gain | 0%, 15%, or 20% depending on income |
For 2026, the long-term 0% rate applies to married couples filing jointly with taxable income up to $98,900. The 20% rate kicks in above $613,700. High earners may also owe an additional 3.8% Net Investment Income Tax (NIIT).
One notable exception: unlike stocks, crypto is not currently subject to wash sale rules. That means you can sell crypto at a loss and immediately buy it back — something stock investors can't do. This can be a useful strategy for reducing your tax bill, though Congress has discussed changing this rule.
Stablecoins and DeFi: Yes, Those Are Taxable Too
One of the most common misconceptions is that trading into a stablecoin — like USDC or USDT — isn't a taxable event because the value doesn't change. The IRS disagrees. Because stablecoins are property, swapping Bitcoin for USDC is a sale and triggers capital gains taxes on any appreciation.
Coinbase has publicly criticized this rule, calling it unnecessarily burdensome. Even stablecoin transactions and tiny gas fees (the small fees paid to process transactions on a blockchain) get captured by Form 1099-DA. But the rules haven't changed yet.
DeFi is a similar story. Congress passed a resolution in early 2026 that rolled back an IRS attempt to classify DeFi platforms as brokers required to file 1099-DAs. But that doesn't make DeFi tax-free — DeFi trades remain taxable events under existing property rules. The difference is simply that no one is reporting them for you, so the burden falls entirely on the individual.
Your 1099-DA Might Be Wrong — Here's Why That Matters
A recent poll found that more than half of American crypto investors are worried about facing an IRS penalty this year due to the new reporting rules. Part of that anxiety is justified: many 1099-DA forms being issued are incomplete or inaccurate.
Why? Exchanges only know about transactions that happened on their platform. If you transferred coins in from another wallet, the exchange may not know what you originally paid — so the cost basis could show as zero or be missing entirely. A form showing incorrect proceeds or missing basis information could make your tax bill look much larger than it actually is.
Taxpayers whose returns don't match their 1099-DA data can expect to receive IRS CP2000 notices — a letter saying the IRS thinks you underreported income. The IRS has already been sending warning letters about crypto activity, and that trend is expected to accelerate.
What Should You Actually Do?
Crypto taxes are genuinely complicated, and the rules are still evolving. Here are practical steps you can take right now:
- Gather all your records. Every exchange, every wallet, every transaction from 2025. The more complete your records, the better.
- Don't rely on 1099-DAs alone. Review them carefully and compare against your own records or crypto tax software output.
- Track per-wallet cost basis. The universal pooling method is gone. Make sure your records — or your tax software — reflect the new per-account rules.
- Report everything, even without a form. DeFi trades, NFT sales, stablecoin swaps — all taxable and all your responsibility to report.
- Consider professional help. If you made frequent trades, used DeFi protocols, or received crypto income (staking rewards, airdrops), a tax professional who understands crypto can be worth the cost.
- Think about holding periods. Selling after one year qualifies for lower long-term capital gains rates — that difference can be significant.
Penalties for non-compliance now range from $10,000 to $250,000, and the IRS has levied over $400 million in fines since 2023. The message is clear: this is an area of active enforcement, and the paperwork trail is now much harder to miss.