After one of the strongest crypto bull runs in history through 2025, many investors realized significant gains, and those gains now have to be reported under a meaningfully stricter set of rules. Whether you sold, swapped, staked, or simply moved assets between wallets last year, 2026 is shaping up to be one of the most consequential filing seasons crypto investors have ever faced.

2026 also marks the first year that Form 1099-DA is in active use, bringing digital asset reporting in line with traditional securities reporting for the first time. The IRS is done being patient with crypto investors. Exchanges are issuing Form 1099-DA, per-wallet cost basis tracking is mandatory, and the digital asset checkbox on Form 1040 now cross-references broker-reported data. The grace period for vague crypto tax reporting is over. Count On Sheep

This guide covers everything you need to know about crypto taxes in 2026, including updated capital gains rates, how Form 1099-DA works in practice, and strategies to minimize your tax liability.

Table of Contents

The 2025 Crypto Bull Run and What It Means for 2026 Taxes

Bitcoin and the broader crypto market experienced extreme volatility following the 2024 US election, powering through the $125,000 mark in October 2025. BTC’s all-time high took place on October 6, 2025, reaching $126,173. Ethereum and other major altcoins posted significant gains alongside Bitcoin during this run. Cryptonews

The 2025 surge was driven by several converging factors: growing institutional adoption, substantial inflows into spot Bitcoin ETFs approved in early 2024, a more crypto-friendly regulatory environment under the new administration, and resurging retail interest following years of post-FTX caution.

Since peaking in October, prices have corrected meaningfully. Macro uncertainty, shifting investor sentiment, and profit-taking have all contributed. For investors who sold or swapped crypto during the 2025 bull run, this means realizing taxable gains, gains that must now be reported in the 2026 filing season using stricter reporting rules than have ever applied to digital assets before.

The Many Types of Crypto Asset Transactions

In the United States, the IRS categorizes crypto assets as property for federal income tax purposes. As such, crypto investments are subject to capital gains taxes, just like stocks and other capital assets. Capital gains are triggered by taxable events such as selling crypto, swapping one token for another, or receiving staking and mining rewards.

Capital gains are taxed in one of two ways depending on how long you held the asset:

Long-term capital gains apply to assets held for more than one year before being sold. For 2026, single filers can earn up to $49,450 in taxable income, or $98,900 for married couples filing jointly, and still pay 0% on long-term capital gains. The updated 2026 long-term capital gains brackets are: CNBC

Short-term capital gains apply to assets held for one year or less and are taxed at ordinary income tax rates (10% to 37%).

A 3.8% Net Investment Income Tax (NIIT) may also apply to high-income earners on top of the applicable capital gains rate.

Crypto-to-Crypto Transactions

When you exchange one crypto asset for another, selling Bitcoin to buy Ethereum, for example, the IRS considers this a taxable event subject to capital gains tax. The same applies to selling any crypto for fiat currency. To calculate the gain or loss, subtract the cost basis of the asset you sold from the fair market value of what you received at the time of the exchange.

Crypto Staking

Staking rewards, additional crypto assets earned by locking up holdings to support a blockchain network, are considered taxable income at ordinary income tax rates at the time of receipt. When those staked assets are later sold or exchanged, the resulting gains are subject to capital gains tax.

NFTs

When you sell or trade an NFT, gains are subject to capital gains tax just like other crypto assets. If you create and sell NFTs as part of a business, the income is generally treated as ordinary business income. For details, see our guide to NFT taxes.

Airdrops and Forks

Airdrops distribute free crypto assets to users, typically for promotional purposes. The fair market value of airdropped tokens at the time of receipt is taxable income. Hard forks, which create a new, separate crypto asset distributed to existing holders, are treated the same way. Soft forks, which update an existing blockchain without distributing new tokens, generally have no direct tax implications.

DeFi

Transactions on decentralized finance platforms may be subject to capital gains taxes, ordinary income taxes, or both depending on the nature of the transaction. Detailed recordkeeping of all DeFi activity is essential for accurate reporting.

Crypto Lending

Interest earned from lending crypto is subject to ordinary income tax. As with traditional loans, borrowers do not owe taxes on the loaned amount itself.

Crypto Mining

Mining rewards are considered taxable income in the year received, at the fair market value of the crypto at the time of receipt. When mined assets are later sold, any subsequent gains are subject to capital gains tax.

Gifts and Donations

Recipients of crypto gifts generally don’t owe taxes until they sell, exchange, or otherwise dispose of the asset. For the giver, gift tax implications may arise if the gift’s value exceeds the annual exclusion, which is $19,000 per recipient for 2025 gifts (confirm the 2026 figure with your advisor as it may be adjusted). Donations of appreciated crypto to qualified charitable organizations are typically tax-deductible; donations exceeding $5,000 require a qualified appraisal before claiming a deduction.

Summary of Crypto Income and Capital Gains Taxes

Non-Taxable Crypto Transactions

The following generally do not trigger a taxable event:

Transferring crypto assets between wallets you own and control. Buying crypto with cash and holding it. Receiving or giving a crypto gift (within the annual exclusion limits). Donating crypto to a 501(c)(3) non-profit.

Crypto Income Tax Transactions (Ordinary Income Rates Apply)

Employee or freelance wages paid in crypto. Earning new tokens through liquidity mining or yield farming. Interest earned from DeFi lending. Selling NFTs you created. Crypto mining earnings. Token airdrops. Staking rewards.

Crypto Capital Gains Tax Transactions

Swapping one token for another on a DeFi exchange or centralized exchange. Spending crypto to buy goods or services. Removing crypto from liquidity pools. Selling or converting crypto to fiat. Selling NFTs you purchased. Crypto margin trading and derivatives.

Crypto Record Keeping and IRS Tax Reporting

Accurate recordkeeping has always been important for crypto, in 2026, it’s non-negotiable. With Form 1099-DA now in active use and the IRS cross-referencing broker-reported data against tax returns, discrepancies are more likely to be flagged than at any point in the past. Maintain detailed records of every transaction: date, amount, fair market value at the time of the transaction, and the platform used.

How Do You Calculate Crypto Cost Basis?

Cost basis is the original value of the crypto at the time you acquired it. If you purchased it directly, cost basis equals what you paid plus any fees or commissions. If you bought the same cryptocurrency at different prices over time, you can choose a calculation method, FIFO (first in, first out), LIFO (last in, first out), or HIFO (highest in, first out).

Special cases: Mined or earned crypto has a cost basis equal to its fair market value at the time it was mined or earned. Crypto received as payment for goods or services uses the fair market value at the time of receipt. Crypto received as a gift generally uses the giver’s cost basis if the asset has appreciated; consult a crypto tax advisor for complex gift situations.

How Do You Complete IRS Form 1040 for Digital Assets?

Form 1040 requires all taxpayers to answer whether they received, sold, exchanged, or otherwise disposed of a digital asset during the year. Examples that require checking “Yes” include: receiving digital assets as payment or reward; earning through mining, staking, or airdrops; swapping tokens; or selling crypto. Examples that allow “No” include: holding crypto in a wallet, transferring between your own wallets, or buying crypto with US dollars.

Form 1099-DA; Now Live for 2025 Transactions

Form 1099-DA, “Digital Asset Proceeds From Broker Transactions,” is no longer forthcoming, it’s here. Starting with the 2025 tax year, digital asset brokers are required to report gross proceeds and cost basis information to the IRS using Form 1099-DA. In early 2026, investors who transacted on covered exchanges began receiving these forms. KoinX

There are two important practical realities to understand about this first filing season under 1099-DA:

The basis gap. Brokers are generally not required to report cost basis for assets acquired before 2025. If you transferred Bitcoin from a hardware wallet to an exchange and sold it, the exchange may report a $0 cost basis to the IRS. This does not mean your cost basis is zero, but you are responsible for documenting the correct figure and reconciling it with what the broker reported. Kugelman Law

The reconciliation trap. The IRS receives a copy of every 1099-DA issued to you. If your tax return does not perfectly match the gross proceeds reported on these forms, it triggers an automated red flag, potentially leading to a CP2000 notice or a full IRS audit. Review every 1099-DA carefully against your own records before filing. Kugelman Law

Wallet-level cost basis tracking has been required since January 1, 2025 under IRS Rev. Proc. 2024-28. Each broker account must track the cost basis separately. Transfers between wallets don’t automatically transfer cost basis, and you must document cost basis for assets moved between platforms. This creates significant challenges for investors who have moved crypto across multiple exchanges and wallets over the years. Ietaxattorney

Note: Full cost basis reporting on 1099-DA for assets purchased and held on the same exchange after January 1, 2026 begins for the 2026 tax year (filed in 2027). Reporting requirements will continue to expand.

Additional IRS Tax Forms for Crypto

Schedule 1 (Form 1040): Reports all crypto-related income, including capital gains, losses, staking income, and other taxable transactions.

Form 8949 and Schedule D: Capital gains and losses from crypto disposals are reported on Form 8949, with totals transferred to Schedule D. Each transaction requires the date acquired, date sold, cost basis, and proceeds.

Form 1099-DA: Issued by covered brokers for 2025 transactions. Review carefully and reconcile against your own records before filing.

Schedule C (if applicable): If you operate a crypto business, mining, trading as a business, etc., report income and expenses on Schedule C.

Form 8300 (for businesses): The IRS has delayed mandatory reporting of digital asset transactions on Form 8300 pending further regulatory guidance. Currently, Form 8300 reporting is only required for cash transactions over $10,000.

Estimated Quarterly Taxes on Crypto

If you expect to owe at least $1,000 in taxes from crypto transactions, or if your withholding won’t cover at least 90% of the tax owed, you may be required to pay estimated quarterly taxes. Calculate payments using Form 1040-ES and submit via the IRS website. Failing to pay estimated taxes when required can result in penalties on top of the tax owed.

Best Practices for Minimizing Crypto Tax Liabilities

Hold for more than one year. Long-term capital gains rates are significantly lower than ordinary income rates. In 2026, a single filer in the 15% long-term bracket pays that rate instead of up to 37% on short-term gains, a meaningful difference on large positions.

Use tax-loss harvesting. Selling crypto assets that have declined in value can offset capital gains from other positions. Unlike stocks, crypto is not currently subject to wash sale rules, meaning you can sell at a loss and repurchase the same asset without waiting 30 days. This could change in future legislation, so take advantage while it remains available.

Reconcile your 1099-DA forms carefully. Given the basis gap and reconciliation risks described above, reviewing every broker-issued 1099-DA against your own records before filing is essential. Discrepancies that go unaddressed are an audit risk.

Plan for estimated quarterly taxes. If you’re realizing significant crypto income throughout the year, don’t wait until April. Planning quarterly payments avoids penalties and ensures you’re not caught off-guard.

Consider tax-advantaged accounts. Investing in crypto through a self-directed IRA or 401(k) that supports digital assets can defer or minimize taxes on gains. Not all providers allow this; Alto IRA is one example that does. Consult a tax advisor to determine whether this structure fits your situation.

Work with a crypto tax professional. The combination of new Form 1099-DA reporting, wallet-level basis tracking requirements, and the ongoing evolution of IRS guidance makes 2026 one of the most complex filing years for crypto investors. A tax advisor with specific crypto experience can help you navigate cost basis documentation, reconcile broker forms, and apply legal strategies to minimize your liability.

Crypto Tax FAQs

Do I have to report crypto even if I didn’t receive a 1099-DA?

Yes. You are responsible for reporting all taxable crypto activity regardless of whether a broker issues a form. DeFi transactions, self-custody activity, and transactions on non-covered platforms will not generate 1099-DAs but remain fully taxable and reportable.

What if my 1099-DA shows a wrong cost basis?

Document your actual cost basis using your own transaction records, exchange history, and wallet logs. You report the correct figures on Form 8949, not whatever the broker reported. A qualified crypto tax advisor can help you build the documentation needed to support your figures.

Does the wash sale rule apply to crypto?

Not currently. Unlike stocks and securities, crypto is not subject to wash sale rules under current law, which means you can sell at a loss and immediately repurchase the same asset. This makes tax-loss harvesting more flexible for crypto than for traditional investments, but this could change with future legislation.

What is the tax treatment of staking rewards?

Staking rewards are treated as ordinary income at their fair market value at the time of receipt. When you later sell the staked assets, gains or losses are subject to capital gains tax based on the difference between your sale price and the cost basis (fair market value at time of receipt).

Do I owe taxes on crypto I transferred between my own wallets?

No. Transferring crypto between wallets you own and control is not a taxable event. However, you should keep detailed records of these transfers so you can accurately track cost basis across platforms, which is now more important than ever under the wallet-level basis tracking rules.

How Harness can help with crypto taxes

Accounting Advisory Services

While crypto trading may be potentially highly profitable in the coming year, the taxation reporting requirements that come with crypto transactions can be challenging. It’s advisable, therefore, to have a tax advisor in your corner who understands the crypto arena in depth. 

At Harness, we can help you find specialist tax advisors who understand the complexities of crypto and are committed to addressing your specific needs. If you require assistance with crypto taxes or want to learn more about our full range of services, register for Harness and start working with an experienced crypto-focused tax advisor today.

Expert tax advisors from Harness can help you prep for April all year-round.

Crypto taxes FAQs

Below are answers to the most frequently asked questions about crypto taxes

Do you have to report crypto under $600?

You are required to pay taxes on all profits from crypto transactions, regardless of the amount. While some reporting requirements for exchanges may involve thresholds like $600, your personal tax liability is based on your overall gains and losses. 

What happens if I don’t report crypto taxes?

Failure to report crypto transactions can lead to fines and penalties, including potential criminal charges in severe cases. Additionally, failure to report capital losses can lead to missed deductions which can lower your tax bill. If you realize that you missed reporting crypto transactions in the past, it’s safest to file an amended tax return.

Do you get a 1099 for crypto?

You may receive an IRS Form 1099 for your crypto transactions, depending on the nature of your transactions and the platforms you use. There are different 1099 forms you may encounter in crypto, including 1099-B, 1099-K, 1099-MISC, and potentially 1099-DA in the future. Remember, whether you receive a 1099 form or not, you’re responsible for reporting all taxable crypto transactions on your tax return. 

Do I have to report crypto if I didn’t sell it?

If you purchase a crypto asset, you generally do not have a taxable event until you sell, exchange, or use it. However, if you receive crypto from activities such as mining, staking, or lending, it is considered taxable income at the time of receipt, even if you don’t sell it immediately.

What is a bull run in crypto?

A bull run in crypto—much like bull runs in any other financial asset—refers to a sustained period of rising prices in the market. Bull runs are characterized by investor optimism, increased trading volume, and significant price appreciation for many cryptocurrencies. Bull runs can last weeks, months, or even years. Several factors can trigger a bull run, including increased adoption, technological advancements, positive regulatory news, and overall market sentiment. While potentially lucrative, bull runs are also often followed by market corrections or bear markets, where prices decline. Investing during a bull run requires careful consideration and risk management.

What are crypto derivatives?

Crypto derivatives are financial contracts whose value is derived from an underlying cryptocurrency, like Bitcoin or Ethereum. Crypto derivatives allow traders to speculate on the future price movements of these assets without actually owning them. Common types include futures (agreements to buy or sell at a set price and date), options (giving the right, but not obligation, to buy or sell), and perpetual swaps (similar to futures but without an expiration date). Derivatives can be used for hedging, speculation, or leverage, amplifying both potential gains and losses. While Crypto derivatives offer sophisticated trading opportunities, they also carry significant risk, particularly due to the volatility of the crypto market.

What are bull and bear markets?

Bull and bear markets describe the overall trend of asset prices in a market, like the cryptocurrency market. A bull market is a period of sustained price increases and investor optimism, often featuring major bull runs. A bear market is the opposite, characterized by declining prices and widespread pessimism. While past performance, including major bull runs, can offer insights, it doesn’t guarantee the timing or magnitude of the next bull market.

What is HODLing in crypto?

“HODLing” is a long-term holding strategy in crypto. HODLers typically resist the urge to sell their crypto assets, even during price drops, believing in the long-term potential of their investments. While HODLing is a popular crypto market strategy, it’s important to note that HODLing doesn’t guarantee profits, as crypto prices have historically tended to be volatile.

 

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