The IRS will require detailed crypto reporting, with full cost-basis reporting starting in 2026.
Bitcoin, Ethereum, and XRP trades made on custodial platforms will be automatically reported through Form 1099-DA.
Self-custody traders must maintain accurate records since wallet transfers will not include basis reporting.
The US Treasury and the Internal Revenue Service have enacted significant reforms that transform how cryptocurrency activity will be reported and taxed into the foreseeable future. These regulations place additional burdens upon exchanges, custodial platforms, and traders dealing in these digital assets, ranging from Bitcoin and Ethereum to XRP.
The changes are meant to achieve more transparency in the crypto market, minimize mistakes in tax returns, and enhance compliance throughout the entire industry. The new regulations will come into full force in 2026, even though partial implementation started in 2025.
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One of the main changes includes a new crypto tax rules system: Form 1099-DA. This must be filed by brokers and custodial platforms for each sale and exchange that takes place on or after January 1, 2025. In phase one, impacting the 2025 calendar year-brokers are primarily required to report gross proceeds. In other words, the IRS knows how much an asset was sold for, but not necessarily what it cost.
The second phase starts in 2026 and is far more detailed. Brokers will have to report both gross proceeds and cost basis for certain digital assets classified as "covered securities." Cost basis refers to what the crypto was bought for originally, including any fees. This way, the IRS calculates gains and losses automatically, without confusing the taxpayers and thereby limiting reporting mistakes. On the flip side, the new system necessitates exchanges and custodial platforms to maintain far greater detail internally.
Traders who keep Bitcoin, Ethereum, XRP, or any other kind of digital assets on custodial platforms will notice that statements provided by brokers will become more complete starting in 2026. In other words, from 2026 onward, for assets purchased and held in the same account, the platform will track cost basis and report it directly to the IRS. This makes tax filing simpler for those who trade within one platform.
Investors who move assets between various exchanges or prefer self-custody wallets will still have to maintain detailed records. In instances when crypto is transferred from one wallet to another, there is no taxable event, but the cost basis should still be tracked for future sales. For those traders using multiple platforms or holding a number of types of cryptocurrencies such as XRP or Ethereum, accurate recordkeeping is even more important.
Crypto-to-crypto trades remain taxable through this. Exchanging cryptocurrencies is going to trigger a reportable event. Improved reporting by custodial platforms will help, but traders who use decentralized systems or self-custody wallets must calculate these values on their own.
These rules are so complex that the IRS has given transitional relief. That would protect brokers from some penalties as long as there is a good-faith effort in the early years to follow the new reporting regime. This temporary relief will give more time for platforms to make changes in technology, particularly to track cost basis.
Even with this relief, enforcement efforts remain robust around unreported cryptocurrency activity. The IRS has continued to pursue cases where crypto income has gone undeclared. This serves to indicate that while platforms get time to adapt, taxpayers are still expected to follow all rules of reporting. As the new structured system becomes routine, enforcement is going to get even more precise.
One important political development came when Congress rolled back an IRS rule attempting to extend broker reporting obligations to decentralized finance platforms. Through the Congressional Review Act in early 2025, the change prevented the IRS from forcing some DeFi platforms to collect user information and report transactions.
The rollback cuts immediate regulatory pressure on decentralized platforms, but it does not end the conversation. Lawmakers and regulatory agencies continue to study how DeFi activities should be taxed. Future rules or legislation might yet impose reporting requirements on decentralized systems; traders of the protocols should remain prepared for further updates.
The IRS came out with guidance that outlined how staking rewards were to be considered for tax purposes in 2025. The staking rewards continue being taxable upon receipt. Upon receiving the reward, any subsequent sale of the asset gives rise to a separate calculation of capital gain or loss. This applies to those traders operating within proof-of-stake networks, like Ethereum, where regular staking rewards might create multiple taxable events throughout the year.
It also opened the door for some investment vehicles, such as trusts and exchange-traded products, to take part in staking without losing their tax-favored status. This will expand the range of financial products that can safely support staking activities, making staking more accessible to institutional investors.
Precise recordkeeping is highly important with these changes in rules. Each transaction must be well documented. Timestamps, fees, and correct cost bases are fundamental to avoiding penalties and errors.
Major tax software companies, as well as crypto tax platforms, are already updating their systems to support the new Form 1099-DA and basis reporting. Such tools will help traders match their records with the information brokers will provide starting in 2026.
Also Read: XRP Price at $2: Is Now the Time to Buy?
Changes in the IRS rule display a more profound perspective toward enhanced oversight and transparency in cryptocurrency trading over the longer term. The two-phase rollout-first puts crypto taxation on a similar footing with traditional securities reporting. Traders, exchanges, and custodians will have to adjust, but the system aims at developing a clearer, more consistent landscape for the emerging digital-asset economy.
1. What is changing under the new IRS rules for cryptocurrency in 2026?
The IRS will require brokers to report both gross proceeds and cost basis for certain digital assets, making tax calculations for crypto trades more automated and transparent.
2. How will the new rules affect Bitcoin, Ethereum, and XRP traders?
Traders using custodial platforms will receive detailed reports that simplify tax filing, while those using multiple exchanges or self-custody wallets must maintain their own records.
3. What is Form 1099-DA?
Form 1099-DA is a new tax form that brokers must use to report digital asset transactions, including sales and exchanges, starting for the 2025 tax year.
4. Are decentralized finance (DeFi) transactions included in these reporting rules?
A recent policy reversal removed DeFi platforms from expanded reporting requirements, but future rules may change as regulators continue studying decentralized activity.
5. How are staking rewards treated for tax purposes?
Staking rewards are considered taxable income when received, and selling the rewarded crypto later creates a separate taxable gain or loss event.
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