For years, crypto investors were mostly on the honor system. You bought, sold, swapped and staked, and it was up to you to work out the tax. That is changing. Crypto brokers now report your sales to the IRS on a new form, Form 1099-DA, and from 2026 many of those forms will include your cost basis too.
Here is what the new reporting means for you, what counts as a taxable event, and how to keep records that hold up.
The digital asset question on your return
Before you report a single trade, you have to answer a yes-or-no question near the top of Form 1040. It asks whether, at any time during the year, you received a digital asset (as a reward, award or payment for property or services) or sold, exchanged or otherwise disposed of one.
You can generally answer "No" if all you did was hold crypto, buy it with U.S. dollars, or move it between wallets and accounts you own. You answer "Yes" if you sold or traded it, spent it, got paid in it, or received mining, staking or airdrop rewards. Everyone filing a Form 1040 must answer, not just people who think they owe tax.
What Form 1099-DA reports
Form 1099-DA is the crypto version of the 1099-B you may already get from a stock brokerage. It is issued by brokers such as custodial exchanges and certain crypto kiosks.
- 2025 sales: brokers must report gross proceeds for transactions on or after January 1, 2025. They were not required to report your cost basis for 2025 sales.
- 2026 sales and later: gross proceeds are reported for all digital assets, and basis is also required for "covered securities."
The catch is in that last term. Under the 2026 Form 1099-DA instructions, a digital asset is a covered security only if it was acquired after 2025 in an account where the broker provided custody, and it stayed in that account until the broker sold it. Crypto you bought before 2026, or moved onto the exchange from another wallet, is a noncovered security. For those, the broker may leave basis blank.
So for 2026, many people will get a 1099-DA that shows what they sold something for but not what they paid. The IRS sees the sale price either way. It's up to you to show what you paid, and your own records are what fill that gap.
What counts as a taxable event
The IRS treats digital assets as property, not currency. That means most ways of getting rid of crypto trigger a gain or loss:
- Selling crypto for dollars
- Trading one coin or token for another
- Spending crypto on goods or services
- Paying transaction fees with crypto
Your gain or loss is the difference between what you received and your basis (generally what you paid, plus fees). If you held the asset for more than one year, it's long-term; one year or less, it's short-term and taxed like ordinary income. Our guide to understanding capital gains covers the rates.
Say you bought 1 ETH for $2,000 and later traded it for another token worth $3,000. You have a $1,000 gain, even though you never touched dollars.
Staking, mining and other income
Rewards from staking and mining are ordinary income. You include their fair market value at the time you receive them, and that value becomes your basis in the new coins. When you later sell those coins, you have a separate capital gain or loss.
For example, if you receive staking rewards worth $500 when they hit your wallet, you report $500 of income. Sell them a year later for $700 and you also have a $200 capital gain. If you mine or stake as a business, the income may belong on Schedule C and can be subject to self-employment tax. Our gig economy tax tips explain how that works.
Where it goes on your return
- Form 8949 and Schedule D: sales and exchanges of crypto held as an investment
- Schedule 1 (Form 1040): staking, mining and similar income for most individuals
- Schedule C: crypto activity carried on as a business
- Form 709: gifts of crypto that require a gift tax return
Wallet-by-wallet basis tracking
Under the IRS's digital asset regulations, starting January 1, 2025, you track basis separately for each wallet or account. You can no longer pool all your Bitcoin across every exchange and hardware wallet and pick whichever lot gives the best result. When you sell from a given wallet, the basis has to come from units in that wallet.
For crypto you already held on January 1, 2025, Rev. Proc. 2024-28 offers a safe harbor for assigning your existing basis to each wallet. To rely on it, you had to make a reasonable allocation and document it in your records under that procedure's rules. If you never did this, talk to a tax professional before filing.
Good habits that make all of this easier:
- Keep a list of every wallet and exchange account you use.
- Export full transaction histories at least once a year, before an exchange closes or changes its export format.
- Record the date, quantity, dollar value and fees for every buy, sell, swap, transfer and reward.
- Label transfers between your own wallets so they aren't mistaken for sales.
- Compare your records against every 1099-DA you receive and note any differences.
When to get professional help
If you only bought and sold a few coins on one exchange, you may be able to handle this with good software. It's worth getting help if you used several wallets and exchanges, traded frequently, used DeFi platforms, received staking or mining income, or have 1099-DA forms with missing or wrong basis. Missed basis and unreported trades are a common reason for IRS letters (see what to do if you get an IRS letter).
Our team can reconcile your transaction history with your 1099-DA forms and report it correctly. Learn more about our personal tax preparation service, or book an appointment.
This article is general information, not tax advice for your situation.
Sources
- IRS: Digital assets
- IRS: Instructions for Form 1099-DA (2026)
- IRS: Understanding your Form 1099-DA
- IRS: Frequently asked questions about broker reporting
- IRS: Rev. Proc. 2024-28 (basis allocation safe harbor)
- IRS: Topic no. 409, Capital gains and losses
General information, not tax advice. Tax rules change and depend on your situation. Figures are for tax year 2026 unless noted; confirm current amounts at IRS.gov or talk to a Stellar Tax professional before acting.