A Beginner’s Guide to New U.S. Crypto Tax Rules
If you’ve filed a U.S. tax return recently, you might have noticed the IRS is putting crypto front and center with a question about "virtual currency" on almost every form. For newcomers to crypto, this may come as a surprise—but reporting income or capital gains from crypto transactions has always been a requirement.
While the rules for individuals haven’t changed, the IRS and Treasury Department rolled out new regulations in 2024 that significantly changed reporting requirements for institutions such as Coinbase.
Curious about what this means and how it might affect you? Let’s break it down.
A quick note before we start…
Coinbase doesn’t provide tax advice. This article represents our stance on IRS guidance received to date, which may continue to evolve and change. None of this should be considered as advice or an individualized recommendation, but it’s important to us that our customers have relevant information available to them in the most accessible way possible. Please consult a tax professional regarding your own tax circumstances.
1. Changes to reporting for crypto brokers and businesses
Starting in 2026, the IRS is changing how digital asset transactions are reported. Until now, only brokers handling securities like stocks and bonds reported sales to the IRS using forms like 1099-B. These sales reporting requirements now also apply to crypto and crypto brokers like Coinbase.
Here’s what these changes mean for you:
Beginning January 1, 2025: Brokers like Coinbase are required to report the gross proceeds from your crypto sales and exchanges on a new tax form called the 1099-DA. Gross proceeds refer to the total amount you received from selling or exchanging cryptocurrency, before accounting for any costs or fees. For example, if you sold Bitcoin for $1,000, that $1,000 would be your gross proceeds—even if you initially paid $900 for the Bitcoin or incurred a fee for the sale. The new 1099-DA form provides a clear record of the proceeds from your transactions, helping you calculate taxable gains or losses and simplifying the process of filing your tax returns.
Beginning January 1, 2026: In addition to gross proceeds, brokers will also report the cost basis, which helps calculate your gains or losses. The cost basis is the original value of your cryptocurrency when you acquired it, plus any associated costs like fees. For example, if you purchased 1 ETH for $1,500 and paid a $50 transaction fee, your cost basis would be $1,550. By including cost basis alongside gross proceeds on the 1099-DA form, brokers help simplify the process of calculating your gains or losses. Essentially, your gain or loss is the difference between the gross proceeds and the cost basis. If you sold that 1 ETH for $2,000, your taxable gain would be $450 ($2,000 - $1,550).
The new digital asset tax regulations do not apply to decentralized or non-custodial crypto exchanges, which do not take possession of the digital asset being sold or traded. These are subject to separate rules published by the IRS on December 27, 2024, which are not covered in this article.
2. What Are a Crypto Broker’s Reporting Requirements?
If you’ve used apps like Robinhood or Fidelity, you’ve probably seen tax forms like 1099-B for stocks. Starting in 2025, crypto brokers like Coinbase will send you a similar form—1099-DA—to report the proceeds of your sales or exchanges.
Here’s what to expect:
As explained above, beginning January 1, 2025, Coinbase will report the gross proceeds of your digital asset sales and exchanges to you on Form 1099-DA. Beginning January 1, 2026, and onward, Coinbase will report both the gross proceeds and cost basis of your sales and exchanges of digital assets also on Form 1099-DA.
You’ll get a copy of the form to use when filing your taxes, and the IRS will also receive a copy to ensure accurate reporting.
For tax year 2025, the IRS is letting taxpayers rely on their own records to calculate cost basis, but starting in 2026, you’ll need to provide clear lot selection instructions to your broker to ensure everything is reported correctly.
3. Tax Certification and Backup Withholding Considerations
Starting in 2026, Coinbase will require you to help complete one of the following tax certification forms:
Form W-9: For U.S. taxpayers.
Form W-8: For non-U.S. taxpayers.
These forms are used to report your transactions properly to the IRS. If you don’t submit the correct form, your crypto sales or exchanges might be subject to backup withholding. This means a portion of your proceeds will be withheld and sent to the IRS.
To avoid surprises, make sure your tax forms are up to date and accurate. If you’re unsure how these changes apply to you, consult a tax professional to ensure you’re prepared for these new reporting rules.
