- The IRS will require centralized crypto exchanges to report cost basis for crypto sales starting in 2026.
- For transactions in 2025, exchanges must report sales on Form 1099-DA but not the cost basis.
- Taxpayers must file Form 8949 reflecting the cost basis and sales to avoid IRS notices.
- Using multiple exchanges complicates cost basis calculations, requiring detailed record-keeping.
- Crypto investors may benefit from current 2025 reporting rules before the new 2026 requirements take effect.
The IRS is implementing new reporting requirements for cryptocurrency sales on centralized exchanges in the United States, effective January 1, 2026. This rule change mandates that exchanges include the cost basis—the original value of an asset when purchased—when reporting digital asset sales on Form 1099-DA. Until December 31, 2025, exchanges like Coinbase and Gemini must report only the sales information without cost basis details.
Under the current rules, any U.S. taxpayer selling digital assets such as Bitcoin (BTC), ether (ETH), or stablecoins like USDT and USDC typically files Form 8949 to report capital gains or losses. If the IRS finds discrepancies between the taxpayer’s Form 8949 and the exchange’s Form 1099-DA, the taxpayer may receive a notice asking for corrections.
Certified public accountants advise taxpayers to carefully consider the timing of crypto sales before the December 31, 2025 deadline due to upcoming changes in Form 1099-DA reporting. Shehan, The Crypto CPA, highlights that new crypto tax software will need to compare these forms closely to minimize audit risks and reconcile any differences.
Handling cost basis reporting becomes more complex when investors use multiple centralized or decentralized exchanges. Taxpayers can use accounting methods like first in, first out (FIFO) or specific identification to determine which asset sale to report, potentially lowering tax liability. For example, an investor who bought 1 BTC on Coinbase at a higher price and another BTC at a lower price on Kraken might prefer to report the higher cost basis to reduce gains, even though exchanges starting in 2026 will report the lower purchase price to the IRS. Accurate records of purchase and sale prices are essential to comply with the law.
The new 2026 regulation aligns crypto exchanges with stockbrokers, who already report both purchase cost basis and sale proceeds. This change will require exchanges to submit more detailed Forms 1099-DA, reflecting cost basis alongside sales amounts for all U.S. customers.
Crypto investors should consider completing any sales under the current 2025 reporting standards, which do not require automatic cost basis reporting to the IRS. This provides a narrow window until the end of the year to operate under the existing rules.
For tax guidance, see the original CPA warnings and updates on Twitter.
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