Analysis: The "watershed" for cryptocurrency taxation is approaching, and the 2026 tax season may become a minefield

As 2026 approaches, U.S. crypto investors are about to face a tax environment that is markedly different from previous years. Several new regulations will come into effect during the 2025 trading year and the 2026 tax season, referred to in the industry as the "watershed moment" for crypto taxation.

One of the core changes is Form 1099-DA. Starting in 2025, "brokers" such as centralized exchanges in the U.S. will be required to report users' crypto asset sales and dispositions to the IRS, and will send out the 1099-DA form for the first time in 2026. The initial forms will mostly only include gross proceeds from sales, excluding cost basis; if taxpayers fail to report clearly on their own, the IRS may default the cost to zero and automatically issue tax notices.

Meanwhile, "cost accounting by wallet" will replace the previously commonly used "pooling" method. The IRS requires that each trading platform account or wallet track costs separately, and when selling, only the asset batches within that wallet can be matched. This will have a particularly significant impact on users with multiple exchanges, DeFi, and self-custody.

Industry tax experts point out that reconstructing historical ledgers and organizing all on-chain and off-chain transaction records will be a one-time but extremely cumbersome task. Although the IRS provides a transitional safe harbor in the 2024-28 program, the compliance window is short, and few investors will complete it.

Tax experts warn that without advance preparation, the 2026 tax season could "automatically trigger" issues due to data mismatches. Under a more data-driven and stricter IRS oversight, actively recording, planning ahead, and collaborating early with tax professionals familiar with crypto assets is becoming a "required course" for crypto investors.