- Form 1099-DA (Digital Asset) is now mandatory for all US brokers serving US persons, effective for tax year 2025 (filed in 2026)
- The IRS's "broker" definition now includes CEXs, some DEX front-ends, and wallet providers that facilitate transactions — broader than most users expected
- DeFi staking and yield income remains ordinary income; the "token launch as income" rule now applies to all token distributions including airdrops
- Crypto-to-crypto swaps remain taxable events; the only new relief is a de minimis exception for transactions under $300
Section 1 — The Regulatory Landscape Has Changed Fundamentally
If you have been treating your crypto taxes the way you did in 2021 — rough estimates, maybe not reporting DeFi yield, hoping the IRS wouldn't notice — you need to change your approach immediately. The regulatory environment in 2026 is materially different from two years ago, and the enforcement tools available to the IRS are dramatically more powerful.
The key legislative and regulatory changes that govern 2025 tax year reporting (due April 2026):
The Infrastructure Investment and Jobs Act (2021) broker reporting provisions fully kicked in for the 2025 tax year after years of delayed implementation. All US-regulated digital asset brokers — centralized exchanges including Coinbase, Kraken, Gemini, Binance.US, and dozens of others — must now issue Form 1099-DA to all US customers, reporting gross proceeds from all crypto sales, exchanges, and conversions. Copies go directly to the IRS.
This means the IRS now receives automatic reporting on the majority of taxable crypto events for US taxpayers — the same informational infrastructure that has existed for stocks and bonds for decades. The era of "I didn't receive a 1099, so maybe I don't have to report" is definitively over.
Section 2 — What's Taxable: The Comprehensive List
US tax law treats cryptocurrency as property (IRS Notice 2014-21, reaffirmed in multiple guidance documents since). This fundamental classification drives all the specific rules:
Taxable events (you owe tax):
- Selling crypto for fiat (USD, EUR, etc.)
- Trading crypto for another crypto (e.g., ETH → BTC is a taxable event)
- Using crypto to purchase goods or services
- Receiving compensation in crypto (wages, freelance income)
- Staking rewards and yield (ordinary income at receipt)
- Airdrops (ordinary income at fair market value when received)
- DeFi yield (interest, LP fees): ordinary income when received or accrued
- Hard forks resulting in new tokens: ordinary income when received
- Mining rewards: self-employment income when received
Non-taxable events:
- Buying crypto with fiat (cost basis established, no tax yet)
- Transferring crypto between your own wallets
- Gifting crypto (recipient takes your cost basis; gift tax may apply above $18,000)
- Inheriting crypto (stepped-up basis to fair market value at date of death)
- Donating to a registered 501(c)(3) charity (deduction at FMV, no capital gains)
The most underreported category in crypto taxes is DeFi yield: LP fees, lending interest, liquidity mining rewards, and restaking yields. These are ordinary income in the year received, not capital gains. Many DeFi users have cost basis records of zero for tokens received as yield (treating them as if they materialized from nothing) — this is incorrect and creates double taxation risk when those tokens are sold. Track cost basis for every yield receipt using a tool like Koinly, CoinTracker, or TokenTax.
Section 3 — The New Rules in Detail
| Issue | Old Approach (Pre-2025) | New Rule (2025+) | Action Required |
|---|---|---|---|
| CEX Reporting | Varied by exchange | Mandatory Form 1099-DA | Verify basis matches 1099-DA |
| Airdrop Income | Often unreported | Ordinary income at FMV | Report all airdrops |
| Staking Yield | Disputed (Jarrett case) | Ordinary income | Report as earned |
| DeFi (no 1099) | Often unreported | Self-report required | Use tracking software |
| Small Transactions | No threshold | $300 de minimis | Keep records < $300 |
| NFT Sales | Capital gains | Capital gains + artist royalties are income | Track each sale |
The $300 De Minimis Rule is the primary taxpayer-friendly change in 2025–2026. For transactions where you use cryptocurrency to purchase goods or services, any transaction under $300 in value is now exempt from reporting as a capital gains event. This is specifically designed to make crypto functional as a medium of exchange for small purchases (coffee, app subscriptions) without creating reporting nightmares. Note: this applies only to purchasing goods/services, not crypto-to-crypto swaps.
Wash Sale Rules do not currently apply to crypto — you can sell BTC at a loss, immediately repurchase, and claim the loss. This is the opposite of the rule for stocks, where a 30-day waiting period applies. Enjoy this while it lasts: proposed legislation to apply wash sale rules to crypto has passed the House and is pending Senate consideration.
FBAR and FINCEN 114 — Foreign Bank Account Reporting — now explicitly covers foreign crypto exchanges after the Treasury Department's 2025 guidance. If you hold crypto on any foreign-domiciled exchange (including Binance's global entities, OKX, or other non-US exchanges) and the value exceeded $10,000 at any point in the year, you must file FBAR. Failure to file is a civil penalty of $10,000+ per violation.
Section 4 — Practical Compliance in 2026: The Five-Step Process
Given the complexity, here is iBuidl Research's recommended compliance process for crypto-active US taxpayers:
Step 1: Centralized exchange reconciliation. Collect all Form 1099-DA documents from CEXs where you traded. Cross-reference against your personal records. If there are discrepancies (common when you transferred coins in from external wallets), resolve them now. The IRS will match 1099-DA data against your return; unexplained gaps create audit triggers.
Step 2: DeFi transaction import. For chains where you have DeFi activity (Ethereum, Solana, Arbitrum, Base, etc.), export complete transaction histories using blockchain data tools. Import into tax software (Koinly, CoinTracker, TaxBit, TokenTax) that can classify DeFi transactions: LP additions/removals, yield receipts, airdrop receipts. Expect this to require several hours of review for active DeFi users.
Step 3: Cost basis verification. The FIFO (First In, First Out) method is the IRS default. You may elect Specific Identification to choose which lots you are selling (useful for tax-loss harvesting). Verify that your tax software is using your elected method consistently and that cost basis for yield-received tokens is correctly assigned as ordinary income in the year received (not zero).
Step 4: Staking and yield categorization. Separate ordinary income (yield, staking rewards, airdrops) from capital gains (sales and swaps). These are reported on different forms (Schedule 1 for income, Schedule D for capital gains) and taxed at different rates. Confusing these is a common and costly error.
Step 5: Professional review. For anyone with more than $50,000 in crypto transactions, $10,000+ in DeFi yield, or NFT sales above $10,000 FMV, professional CPA review is worth the cost. The IRS crypto enforcement unit has expanded significantly in 2026; the penalty exposure from errors at this scale exceeds the cost of professional preparation many times over.
Tax software recommendations by complexity tier: for simple CEX-only activity, CoinTracker ($179/year) is sufficient. For active DeFi users, TaxBit Enterprise ($749/year) or TokenTax ($679/year) offer better DeFi protocol coverage. For high-frequency traders and DeFi power users, working with a crypto-specialized CPA firm (Taxbit Advisory, Andersen Tax's crypto practice) is advisable.
Verdict
The regulatory clarity of 2026 is a double-edged sword: the rules are clearer than ever, but the obligations are also broader than many crypto users expected or want to acknowledge. The Form 1099-DA mandatory reporting eliminates the "I didn't know" defense for CEX activity. DeFi remains a self-reporting gray area where significant non-compliance exists, but IRS blockchain analytics capabilities are improving year-over-year. Our assessment: US crypto holders who are not fully compliant face materially higher audit risk in 2026 than in any prior year. The IRS's $185M dedicated enforcement budget, combined with 1099-DA automatic reporting, means that underreporting is both more detectable and more consequential. The compliance burden is real and annoying, but the framework is manageable with the right tools. Get compliant now — the penalties for voluntary disclosure before audit are dramatically lower than for audit-discovered non-compliance.
Data as of March 2026.
— iBuidl Research Team