How to File Crypto Taxes in 2026: What the IRS Expects

There’s no need to panic. Crypto tax rules haven’t been rewritten overnight. But you do need to make some changes in your tax reporting methods. The IRS is applying existing crypto tax rules more consistently, using better data and more precise transaction matching. As your transaction volumes increase and crypto activity spreads across more exchanges, wallets, and platforms, accurate reporting will depend on how well your crypto tax professional maintains clean records. Most crypto taxpayers struggle to understand what needs to be reported, how different transactions are classified, and what forms you have to fill in. The key takeaway of this professional crypto tax guide is to answer all these questions and more importantly, explain how to file crypto taxes in 2026 avoiding any mistakes that will cost you during tax season.

1. What Has Changed for Crypto Taxpayers in 2026?

Starting in 2025, brokers have begun reporting digital asset proceeds in the new Form 1099-DA. As explained by the IRS, all sales of digital assets and the cost basis in some cases must be reported in your tax return via Form 1099-DA. This form will be filed by crypto taxpayers for the first time during the 2026 filing season.

What has changed most prominently is that Form 1099-DA requires mandatory reporting of gross proceeds and also basis information for “covered” digital assets. That means the IRS will have a crystal clear picture of your gains or losses in addition to total sales. So your crypto bookkeeper or crypto tax accountant should be certain that all records across exchanges and wallets are consistent.

In addition, if you didn’t clean up your historical cost basis before the IRS transition deadline, defending your numbers is now harder. The safe-harbor period for transitioning crypto cost basis ended on January 1, 2025. From that point forward, taxpayers are expected to use specific identification, which means being able to track assets consistently across wallets and exchanges rather than relying on broad or averaged estimates.

Without a doubt, 2026 is a turning point for crypto traders, investors, and businesses who need to report taxes. You cannot wait until the last minute and expect a tax accountant to clean things up for you.

According to expert crypto CPAs at OnChain Accounting, the IRS has made it clear that anyone who bought, sold, or received digital assets must answer the digital asset question on Form 1040.

The question asks if, at any time during the tax year, you received a digital asset or sold/exchanged/disposed of a digital asset or a financial interest in one. If you check ‘yes’, any income and capital gains as well as losses should be reported in relevant tax forms such as Form 8949, Schedule D, or Schedule C.

2. What Stays the Same in 2026 for Crypto Tax Accounting?

Yes, the rules have tightened and data matching has been finetuned. However, as with all accounting principles, the core tax rules for crypto remain untouched. It’s a matter of enforcing the rules more consistently across all wallets, exchanges, and platforms.

What’s still taxable?

These events count as taxable:

1. Selling crypto for fiat: For example, if you sell Bitcoin, Ethereum, or any other digital asset for USD (or another currency), your crypto tax accountant must report capital gains or losses.
2. Trading one crypto for another: This event counts as disposing of one asset and acquiring another, thereby, taxable.
3. Using crypto to pay for goods or services: Don’t ignore any purchases as they create taxable gains or losses.
4. Earning crypto as income: Staking rewards, mining income, airdrops tied to activity, and crypto paid for work are still taxed as ordinary income at fair market value when received.

What isn’t taxable?

Non-taxable crypto events include,

1. Buying crypto with fiat: This will only establish cost basis. No tax reporting required.
2. Transferring crypto between wallets you own: Still non-taxable in 2026 although your crypto bookkeeper should track transfers for accurate records.

2026 doesn’t redefine what’s taxable. Crypto is treated as property by the Internal Revenue Service and the same disposal-based tax logic still applies.

3. Classification of Cryptocurrency Taxation

Once a transaction is taxable, the next question is how it’s taxed. In 2026, crypto taxation falls into two categories: capital gains and ordinary income. Understanding this distinction between capital gains and ordinary income is necessary because it affects both how transactions are reported and how they are taxed.

Capital Gains

Whenever you dispose of crypto that was previously acquired, it calls capital gains. The taxable amount is calculated based on the difference between what you paid (your cost basis) and what you received when you disposed of it. The holding period is also recorded for capital gains since digital assets held longer than a year are taxed differently than those held for shorter periods.

Ordinary Income

This type of taxation applies when you receive crypto as compensation or rewards. It includes income from staking, mining, airdrops, and payments for goods or services. The value of the crypto at the time you receive it (fair market value) is treated as income.

Losses also play a major role in crypto taxation. Capital losses can be used to offset capital gains, and in some cases reduce overall taxable income. Many taxpayers overlook this entirely. A detailed explanation of how crypto losses work is covered in our related guide by crypto tax experts on how to file crypto taxes losses and offset capital gains through tax loss harvesting.

4. Five Core Steps to File Crypto Taxes in 2026

Reporting your tax returns in 2026 is about presenting an accurate financial record. This means, your crypto tax professional will follow these steps for compliant filing:

Step 1 - Reconstruct a full transaction history by pulling crypto activity from every exchange, wallet, and platform used.

Step 2 - Separate taxable activity from non-taxable activity. The latter is equally important sinceit affects cost basis and holding period.

Step 3 - Calculate gains, losses, and income based on precise cost basis and fair market value at the time of each transaction.

Step 4 - Report consolidated totals on the tax return. Crypto transaction reconciliation is done to make sure all numbers tie back to underlying records.

Step 5 - Keep supporting documentation since records are important in case an audit is conducted.

The challenge with crypto taxation doesn’t come with the rules. It’s the sheer volume of transactions and the need to reconcile activity across multiple platforms with a volatile currency. A qualified crypto tax expert who’s savvy in cryptocurrency accounting is able to handle this process efficiently.

5. Important Forms You Need to Fill in 2026 for Crypto Tax Reporting

You’ll be using the IRS forms that all taxpayers of property apply. Let’s understand which forms apply to your crypto activity:

Form 1040 (Digital Asset Question)

Every taxpayer must answer the digital asset question on Form 1040 if they bought, sold, received, or interacted with cryptocurrency. The IRS treats this question as a gateway to crypto compliance, and answering “no” incorrectly will create issues.

Capital Gains Reporting (Investment Activity)

If you sold, traded, or spent crypto, the resulting gains or losses are reported alongside other investment activity:

• Form 8949: This is where individual crypto disposals are reported. Each taxable sale, trade, or spend is listed here with its cost basis, proceeds, and resulting gain or loss.
• Schedule D (Form 1040): Totals from Form 8949 roll up into Schedule D, which summarizes your overall capital gains and losses for the year.

Since crypto is treated as property, disposals flow into capital gains reporting rather than a standalone crypto form.

Income reporting (earned crypto)

Crypto received through staking, mining, rewards, or payments is reported as ordinary income based on its fair market value when received. This applies even if you didn’t convert that crypto into cash.

How it’s reported depends on why you received it:

• Schedule 1 (Form 1040): Individually earned crypto income such as staking rewards or promotional rewards appears here as “Other Income.”
• Schedule C (Form 1040): Report here if you earn crypto as part of business income (mining or crypto payments).
• Form W-2 or Form 1099: If an employer or platform pays you in crypto (e.g., staking rewards), the value is reported on a W-2 or 1099, just like cash compensation.

Crypto taxes don’t add new forms in 2026, but the numbers are being reviewed more closely.

6. Avoiding the Most Common Crypto Tax Mistakes

Crypto tax issues stem from small misunderstandings that compound over time and they are easily avoidable. If you are someone who ignores maintaining records of minor trades or assumes that crypto-to-crypto swaps aren’t taxable without getting advice from a crypto tax CPA, you are making an obvious mistake that will cost you when an audit, or worse, a penalty arrives.

Another common error most individual traders make is overlooking income from staking and rewards. When you don’t report income, your tax reports will be inaccurate and these transactions can be tracked during audits.

Crypto tax experts also advise against assuming that crypto transaction reconciliation is an additional step. Don’t take the process of maintaining consistency in your crypto records lightly.

Now these mistakes rarely cause immediate consequences. Instead, they create gaps that surface later when historical data is reviewed or matched against third-party records.

Although crypto is always evolving, when it comes to taxes, the expectations are no longer experimental. They are well-established and in 2026, the IRS expects business owners and individual traders to report taxes accurately.

OnChain Accounting is a specialist cryptocurrency accounting firm that works exclusively with crypto traders, investors, and Web3 businesses. Our team of professional crypto tax CPAs, crypto bookkeepers, and cryptocurrency accountants reconciles complex crypto transactions, maintains accurate records, and reports taxes so you have nothing to worry about when tax season arrives.

If your crypto activity has grown more complex over time and you need help checking whether your tax reporting is correct, schedule a free consultation with a crypto tax professional now.

Be proactive before the tax season arrives. Expert crypto tax advice can help you identify issues early and prevent costly issues later.

7. Further Reading

How to File Crypto Taxes Losses: Offset Capital Gains with Tax Loss Harvesting