For years, crypto tax reporting ran on the honor system. Exchanges sent little or nothing to the IRS, and investors pieced together gains from downloaded spreadsheets in April. That era is over. Exchanges and other brokers now report your crypto sales to the IRS on a new form, and the rules for tracking what you paid for each coin have tightened. If you trade, stake or hold crypto across more than one platform, the last quarter of the year is when you can still shape the tax bill rather than just report it.
What changed: Form 1099-DA
Crypto exchanges and other custodial platforms are now brokers in the eyes of the IRS. Starting with sales on or after January 1, 2025, they report your gross proceeds to the IRS on Form 1099-DA, the digital-asset version of the 1099-B you get from a stock brokerage. For assets acquired on or after January 1, 2026 and held in the same account, brokers also report your cost basis.
That second date matters more than it looks. Coins you bought before 2026, or moved in from another wallet or exchange, are generally "noncovered." The broker may report what you sold them for but not what you paid. If the cost basis is blank, the IRS sees proceeds with nothing to offset them, and it is up to you to prove the basis. Without records, a sale can look like 100% gain.
Cost basis is now tracked wallet by wallet
Many investors used to treat all of their holdings of a coin as one big pile, wherever it sat, and pick the most favorable lots when they sold. Since January 1, 2025, basis has to be tracked separately for each wallet and each exchange account. A coin sold from one exchange uses the cost of the units in that account, not a cheaper lot sitting in a hardware wallet.
Two practical consequences:
- Moving coins between platforms carries your basis with them only if you keep the records. A transfer is not a sale, but the receiving exchange usually does not know what you paid. Keep the purchase history from the sending side.
- You choose which lots you sell, but the choice has to be made at the time of sale. Exchanges generally default to first in, first out. If you want to sell your highest-cost units first, set that up with the platform (many offer a standing lot-selection setting) before you sell, not when you file.
What counts as a taxable event
The IRS treats crypto as property, not currency. That means:
- Selling crypto for dollars is a sale, with gain or loss measured against your basis.
- Trading one coin for another is also a sale of the first coin, even though no dollars changed hands.
- Spending crypto on goods or services is a sale at the coin’s value that day.
- Staking and mining rewards are ordinary income when you gain control of them, at their value then. That value becomes the basis of the new coins.
- Moving coins between your own wallets is not taxable, but it is where most missing-basis problems start.
Every Form 1040 also asks a yes-or-no question about digital assets. If you sold, traded, received rewards or were paid in crypto during the year, the answer is yes.
The rates that apply in 2026
Crypto held more than one year is a long-term capital asset. For 2026, long-term gains are taxed at 0% up to $98,900 of taxable income for married couples filing jointly ($49,450 single), 15% up to $613,700 ($545,500 single), and 20% above that. Crypto held one year or less is taxed at your ordinary income rate, up to 37%. High earners also owe the 3.8% net investment income tax once modified AGI passes $250,000 for joint filers ($200,000 single). The full schedule is on our 2026 Tax Rates page.
The gap between short-term and long-term is large. For a household in the 35% bracket that also owes the 3.8% surtax, a short-term gain costs 38.8 cents on the dollar in federal tax; the same gain held past one year costs 23.8 cents. A few weeks of waiting can be worth more than any other move on this list.
Year-end moves that still work
- Check holding periods before you sell. If a position crosses the one-year mark in January, selling in December could turn a long-term gain into a short-term one.
- Harvest losses where you have them. As an illustration, a coin bought for $30,000 and now worth $18,000 can be sold to realize a $12,000 capital loss. Losses offset capital gains first; up to $3,000 of any excess offsets ordinary income, and the rest carries forward to future years.
- Understand the wash-sale rule as written. The wash-sale rule in the tax code applies to stock and securities. Congress has considered extending it to digital assets, so confirm current law at the time you trade, and remember that a loss sale still needs a real change in your position to hold up.
- Rebuild missing basis now. Pull purchase histories from every exchange you have used, including closed accounts, while they are still downloadable. It is far easier in November than after your 1099-DAs arrive.
- Give appreciated coins instead of cash. Donating crypto held more than one year to a qualified charity can produce a deduction for its full fair market value with no tax on the gain. Gifts of crypto valued over $5,000 need a qualified appraisal, and starting in 2026 itemized charitable deductions only count to the extent they exceed 0.5% of your AGI, so it pays to plan the size and timing.
- Cover the tax on gains you have already taken. A large gain early in the year can create an underpayment penalty. A fourth-quarter estimated payment or extra withholding before December 31 can close the gap.
How we approach it
We start by reconciling what the exchanges will report against what actually happened: every account, every transfer and every reward, so your basis is documented before the forms arrive. Then we build a full-year projection with your crypto activity alongside your wages, business income and the rest of your return. That shows where you sit in each capital gains bracket and whether you will cross the net investment income tax threshold, so decisions about selling, harvesting or giving are made with the real numbers in front of you. The same team prepares your return, so nothing gets lost between planning and filing. See our Pricing page for how engagements work.
Start with a complimentary tax projection
New clients start with a complimentary tax projection and a short conversation with one of our tax planning specialists, who will look at your crypto activity alongside the rest of your return and tell you what is worth doing before December 31. Book a consultation on our Contact page.
This article is general information about federal tax rules as of 2026. It is not tax advice for your situation; the right answer depends on your facts, your state and your full return.