Filing taxes can be a perplexing task for cryptocurrency investors. In the early days of crypto trading, the landscape was largely unregulated, and trades faced minimal tax implications. However, in March 2014, the IRS took a significant step by issuing Notice 2014-21, categorizing all cryptocurrencies as property instead of currency. This classification meant that selling cryptocurrencies for traditional currencies, trading one cryptocurrency for another, or using cryptocurrencies to make purchases all became taxable events.

Fast forward to 2019, and the IRS ramped up its enforcement efforts by introducing a specific crypto question to Form 1040 and conducting rigorous audits of cryptocurrency holders. Major exchanges also began issuing 1099 forms to adhere to these new guidelines. As we approach the 2026 tax filing season, there are two more critical changes that every crypto investor should be aware of.

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1. Understanding Form 1099-DA

Beginning with the 2025 tax year, all crypto brokers—including centralized platforms like Coinbase (NASDAQ: COIN) and selected decentralized exchanges—are mandated to issue a new document, the 1099-DA, to users. This form will record essential details about their cost basis, sales, trades, and the disposal of digital assets.

This new requirement is significant because dates and cost basis information will provide a standardized baseline for capital gains tax calculations. Consequently, while this change could deter casual traders or those looking for tax arbitrage opportunities, it may also serve to enhance the credibility of cryptocurrencies, making them more attractive for conservative retail and institutional investors who favor clarity and compliance in their investments.

2. The Necessity of Per-Wallet/Exchange Cost Basis Reporting

The second critical change involves the new requirement to track and report the cost basis for crypto assets held across various wallets and exchanges separately. For instance, if you decide to purchase Bitcoin (CRYPTO: BTC) through both Coinbase and Robinhood (NASDAQ: HOOD), you’ll be responsible for reporting the cost basis for each exchange independently. Although the introduction of 1099-DA forms aims to streamline this process, it does introduce a layer of complexity compared to the older method of lumping together all holdings of a particular token across different platforms.

Implications for Crypto Investors

While these stricter IRS regulations might pose challenges for individual crypto investors, they also signal a lasting commitment to cryptocurrencies as a viable asset class rather than just a passing trend. For those who wish to gain exposure to the cryptocurrency market but prefer to avoid the intricacies related to exchange and wallet-specific regulations, investing in exchange-traded funds (ETFs) focusing on leading cryptocurrencies offers a simplified alternative. These ETFs can be traded similarly to stocks, with gains and losses reported in a straightforward manner, offering a hassle-free approach to investing in digital assets.

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Leo Sun has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Bitcoin and Coinbase Global. The Motley Fool has a disclosure policy.