Crypto investors in the U.S. will soon face a slew of new tax reporting requirements related to digital assets, as the government accelerates its attempt to rein in unscrupulous actors and prevent tax dodgers in the crypto space from gaining a foothold. The new rules announced Friday are expected to inject approximately $28 billion into the federal government from crypto, according to the Congressional Budget Office.
“These updates offer enterprises – specifically custodial exchanges – the guidance needed for proper compliance, further solidifying crypto's position within the broader financial ecosystem,” Erin Fennimore, vice president of tax at TaxBit, told TheStreet Crypto about the new rules.
Starting in 2026, the Internal Revenue Service (IRS) will require crypto brokers to record the cost basis for crypto transactions, which will allow for calculations of capital gains and losses. Crypto firms will also be required to issue a straightforward 1099 form, comparable to what brokerages or banks issue today.
Platforms operating in a decentralized manner, especially those not directly controlling or holding crypto, will not be subject to the new IRS regulations, however.
“With this new framework, we anticipate increased market adoption,” TaxBit's Fennimore said. “These regulations address and clarify many critical areas while providing relief for the more complex areas that require additional time for Treasury and the industry to address properly.”
Additionally, the IRS now requires the reporting of all annual NFT proceeds of $600 or more.
“As expected, given the timing, Treasury had to leave some parts out. Interestingly, they decided to defer on DeFi by not immediately requiring full reporting,” said Tony Tuths, a crypto tax practice leader and principal at Alternative Investments.
Overall, the IRS is hoping the rule changes will be a step forward in curbing tax evasion in the crypto industry. “We need to make sure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets,” IRS Commissioner Danny Werfel said.