Cryptocurrency tax reporting has moved from a gray area to a heavily documented one in just a couple of years, and 2026 is the first year the IRS gets a real paper trail on most trades through the new Form 1099-DA. The tax rules themselves haven't fundamentally changed — crypto is still property, not currency, for tax purposes — but the amount of third-party reporting the IRS now receives has changed enormously.
What Counts as a Taxable Event
The core rule hasn't moved: crypto is treated as property, so you owe tax when you dispose of it at a gain, the same as with stock. These are the actions that trigger a taxable event:
- Selling crypto for U.S. dollars or other fiat currency
- Trading one cryptocurrency for another (Bitcoin for Ethereum, for example) — this is a disposal of the first asset, even though no cash changed hands
- Spending crypto on goods or services — you're disposing of the asset at its value at the time of the purchase
- Receiving staking rewards, mining income, or airdrops — taxed as ordinary income at fair market value when received, separate from any later capital gain or loss when you eventually sell that crypto
These do not trigger a taxable event on their own:
- Buying crypto with cash and simply holding it
- Transferring crypto between your own wallets or your own accounts on different exchanges
- Donating crypto directly to a qualified charity (see our charitable giving guide — this can let you deduct the fair market value while avoiding capital gains tax on the appreciation entirely)
Form 1099-DA: What's New for 2026
Starting with 2025 transactions (forms arriving in early 2026), covered brokers — mainly centralized exchanges — must issue Form 1099-DA reporting gross proceeds from your digital asset sales, similar to how Form 1099-B works for stock brokerages. This is a genuinely new level of IRS visibility into crypto activity that didn't exist in a standardized way before.
⚠️ For the 2025 tax year (the forms you're receiving in early 2026), brokers are generally not required to report your cost basis — only gross proceeds. If you transferred crypto into an exchange from a hardware wallet or a different platform before selling, your 1099-DA may show a $0 or blank cost basis, which — if you don't correct it — makes it look like your entire sale proceeds were pure profit. You are still responsible for tracking and reporting your real cost basis yourself, even when the form doesn't show it.
Cost basis reporting on Form 1099-DA is scheduled to begin with 2026 transactions, meaning the first forms that include basis information won't arrive until early 2027. Until then, keep your own purchase records — dates, amounts, and prices — for every wallet and platform, not just your current exchange.
The Account-by-Account Method Replaces "Universal" Cost Basis
Previously, many investors treated all their holdings of a given cryptocurrency as one combined pool for cost-basis purposes, regardless of which wallet or exchange held them — the "universal method." The IRS has eliminated this approach going forward, requiring an account-by-account (sometimes called wallet-by-wallet) method instead: you track cost basis separately for the specific units held in each wallet or account, and a safe-harbor election let taxpayers allocate their existing basis to specific wallets as of the transition date. If you've been using the universal method informally, this is worth cleaning up before it causes a mismatch with what an exchange reports.
No Wash-Sale Rule (For Now)
Unlike stocks and securities, cryptocurrency is currently not subject to the wash-sale rule, which normally disallows a loss deduction if you buy substantially the same security within 30 days before or after selling it at a loss. This means you can sell crypto at a loss to realize the tax benefit and immediately buy it back, keeping your position while still claiming the loss — a strategy stocks and mutual funds don't allow. This has been a frequent target of legislative proposals to close the gap, so don't assume it will remain this way indefinitely; check current rules before relying on this each year.
A Worked Example
You bought 1 Bitcoin for $30,000 in 2023. In 2026, you use 0.1 BTC (worth $8,000 at the time) to buy a laptop. That's a taxable disposal of $8,000 worth of Bitcoin with a cost basis of $3,000 (10% of your original $30,000 purchase) — a $5,000 long-term capital gain, since you held it more than a year, taxed at the 0/15/20% preferential rates depending on your income. The remaining 0.9 BTC keeps its original cost basis and holding period until you dispose of it too.
NFTs and DeFi
NFTs follow the same general property-disposal framework as other crypto, though the IRS has signaled that some NFTs may be treated as "collectibles" subject to a higher 28% maximum long-term capital gains rate rather than the standard 0/15/20% — a distinction that depends on facts and circumstances the IRS hasn't fully clarified. DeFi activity (liquidity pool rewards, lending interest, yield farming) generally produces ordinary income when rewards are received and capital gains/losses on subsequent disposals, but the recordkeeping burden is often heavier than centralized-exchange trading since no single 1099-DA will capture the full picture.
Recordkeeping That Actually Holds Up
Because 1099-DA reporting is incomplete for at least another year, the practical burden of proving your cost basis still falls on you. For every wallet and exchange, keep: the date of each acquisition, the amount paid (including any transaction fees, which add to your basis), and records of every transfer between your own wallets, so you can show an unbroken chain of ownership rather than having an exchange treat an incoming transfer as a $0-basis acquisition. Several crypto tax software tools can reconstruct this from exchange API connections and wallet addresses, which is often far less painful than manually reconstructing years of transaction history after the fact.
Common Questions
Do I owe tax if my crypto lost value and I never sold? No — unrealized losses (or gains) on crypto you still hold aren't taxable events. Tax applies when you dispose of the asset, not while you're simply holding it.
What if I never received a 1099-DA? You're still required to report all your taxable crypto activity regardless of whether a form was issued — the absence of a 1099-DA doesn't mean the income is exempt, it may just mean the platform wasn't a covered broker or the transaction fell outside its reporting scope.
Are crypto-to-crypto trades really taxable? Yes — this is one of the most commonly missed rules. Trading Bitcoin for Ethereum is a sale of Bitcoin (at its dollar value that day) followed by a purchase of Ethereum, not a tax-free exchange.
💡 Once you've calculated your net crypto gains for the year, run them through the Capital Gains preset to see which bracket they fall into alongside your other income.