US crypto tax rules explained (2026): property treatment, 1099-DA and what Congress may change

Who this is for: US taxpayers, founders, fund operations staff and policy readers who need to understand how crypto is taxed for the 2025 and 2026 tax years, what the new broker forms report, which bills are live in Congress, and how to compute a gain under the wallet-by-wallet rule.

For most of the last decade, US crypto taxation ran on a 2014 notice, a handful of revenue rulings and a lot of guesswork. That era is ending. The 2025 tax year was the first in which exchanges reported customers’ gross proceeds to the IRS on a crypto-specific form, the first under a wallet-by-wallet basis rule, and the first in which the IRS could match what you filed against what your broker filed. The 2026 tax year adds broker-reported cost basis.

Congress, meanwhile, is active but unresolved: a Lummis bill in July 2025, a House committee vote on H.R. 10357 on September 16, 2026, and the Senate ADAPT Act on September 30, 2026, none of them law. This guide explains the rules as they stand in October 2026, then works through a swap, a staking reward and an airdrop under FIFO and specific identification, naming the form each number lands on. It is education, not tax advice.

US crypto tax by the numbers

Property, not currency: the 2014 foundation

The single most important fact in US crypto tax is that the IRS does not treat bitcoin, ether or any token as money. Notice 2014-21, issued in March 2014, concluded that virtual currency is property and that general property tax principles apply. Selling crypto for dollars produces a capital gain or loss. Swapping one token for another, including into a stablecoin, means you sold the first at fair market value and bought the second. Buying a coffee with bitcoin is a disposal of the fraction you spent, and paying a network fee in ETH is, strictly, a disposal too. There is no small-transaction exemption as of October 2026, which is the gap the de minimis provisions in Congress aim to fill.

Not taxable: buying with dollars and holding, moving crypto between wallets you own (the basis travels with the units), donating appreciated crypto held over a year to a qualified charity, and gifting within the annual exclusion. Since the 2020 tax year the Form 1040 has carried a yes-or-no digital asset question on page one; receiving, selling or exchanging a digital asset requires a yes, while merely holding does not.

Capital gains versus ordinary income

Capital gains and the holding period

A token held one year or less produces a short-term gain taxed at ordinary rates, up to 37 percent in 2026. Held more than a year, the gain is long-term and taxed at 0, 15 or 20 percent. For 2026, IRS Rev. Proc. 2025-32 sets the 0 percent band for single filers at taxable income up to $49,450 and the 15 percent band up to $545,500; for joint filers the breakpoints are $98,900 and $613,700. The 3.8 percent net investment income tax applies above $200,000 of modified adjusted gross income (single) or $250,000 (joint). Capital losses offset gains, then up to $3,000 of ordinary income a year, with the excess carried forward.

Staking rewards: Rev. Rul. 2023-14

Revenue Ruling 2023-14, released in July 2023, holds that a taxpayer who receives units as validation rewards must include their fair market value in gross income in the year the taxpayer gains “dominion and control” over them, whether staking directly or through an exchange. The amount included becomes the basis of the reward units, and the holding period starts on receipt. The industry’s counter-argument, that rewards are newly created property taxable only on sale, underpins the deferral provisions in the Lummis bill and the June 2026 House draft H.R. 9175; that deferral was dropped from H.R. 10357 before the September 2026 markup. For the mechanics, see the CCS guide on what crypto staking is.

Mining, airdrops and hard forks

Notice 2014-21 addressed mining directly: a miner has gross income equal to the fair market value of coins when received, and a mining business also owes self-employment tax on Schedule C, where equipment and electricity are deductible. Revenue Ruling 2019-24, issued in October 2019, covers forks and airdrops: a hard fork that delivers no new units produces no income, while units you can control from a fork or an airdrop are ordinary income at fair market value when they land in your wallet. Lending interest, liquidity-provider rewards and referral bonuses are also ordinary income, each creating a new lot with basis equal to the amount included.

Cost basis and the wallet-by-wallet rule

Gain equals proceeds minus the adjusted basis of the specific units disposed of. Basis is what you paid including fees, or the amount included in income if the units arrived as a reward. The hard part is deciding which units you sold when you hold many lots bought at different prices.

Specific identification and the FIFO default

Absent an adequate identification, the IRS treats the earliest acquired units as sold first (FIFO). Taxpayers may instead specifically identify the units sold, choosing high-basis lots to minimise gains or long-term lots to secure the lower rate; highest-in, first-out (HIFO) is simply a pattern of specific identification. Under the final broker regulations (T.D. 10000, June 2024), broker-held units must be identified no later than the date and time of sale, and self-custodied units in your own records by the time of sale.

Wallet by wallet from January 1, 2025

Before 2025, most taxpayers and tax software pooled every lot across every exchange and wallet into one ledger. Rev. Proc. 2024-28, issued December 2024 and effective January 1, 2025, ended that: when you sell ETH on an exchange, you can only identify lots actually in that account, and the FIFO default applies to that account alone. The same procedure offered a one-time safe harbor to allocate unused basis across the units held in each wallet or account as of January 1, 2025. Articles in October 2026 have described the Notice 2026-20 extension (below) as a window to rewrite basis, which overstates it: the Notice extends how you identify lots in 2026, it does not reopen the January 2025 allocation.

Notice 2025-7 and Notice 2026-20

Because custodial brokers lacked systems to accept lot-level instructions at the moment of sale, Notice 2025-7 (December 2024) let taxpayers identify broker-held units sold in 2025 from their own books and records, and on March 18, 2026, Notice 2026-20 extended that relief through December 31, 2026. The caveat, flagged by EY and KPMG in March 2026, is that the broker’s Form 1099-DA for 2026 will report basis from its own records, so the IRS may receive a figure that differs from yours. You reconcile the difference on Form 8949.

Form 1099-DA and broker reporting

The Infrastructure Investment and Jobs Act of November 2021 extended the definition of “broker” to digital asset platforms. The final regulations, T.D. 10000 in June 2024, created Form 1099-DA, Digital Asset Proceeds From Broker Transactions. The rollout has three stages.

1. 2025 transactions, reported in early 2026: gross proceeds only. Custodial brokers report the gross proceeds of each sale or exchange, with no cost basis required. Notice 2024-56 waived penalties for good-faith efforts, and The Tax Adviser reported in March 2026 that some 2025 forms may arrive as late as February 2027.
2. 2026 transactions, reported in early 2027: basis for covered assets. Brokers report cost basis and acquisition dates for units acquired in their custody on or after January 1, 2026; units deposited from outside are not covered, so proceeds appear without basis.
3. 2027 onward: full regime. Notice 2025-33, issued June 26, 2025, pushed the start of 24 percent backup withholding for customers without certified taxpayer identification numbers to January 1, 2027.

Brokers may aggregate qualifying stablecoin sales and may skip reporting for a customer whose stablecoin sales total $10,000 or less in a year; specified NFTs have a $600 threshold. None of this relieves you of your own obligation: every disposal, including on decentralised exchanges and in self-custody, goes on Form 8949 and Schedule D whether or not a broker sent a form. Spot bitcoin and ether ETF investors are on a different track, since those grantor trusts report through Form 1099-B, as explained in the CCS guide on how spot bitcoin ETFs work.

The DeFi broker rule and its repeal

A second rule, finalised in December 2024, would have treated DeFi front-end providers as brokers required to collect customer information and file Form 1099-DA from 2027. The industry argued that software interfaces cannot know who their users are, and Congress agreed: H.J.Res.25, a Congressional Review Act resolution, passed the House 292 to 132 on March 11, 2025, the Senate 70 to 28 on March 26, 2025, and was signed on April 10, 2025. The repeal changed nothing about the taxation of DeFi activity itself. Swaps on a decentralised exchange are still disposals, liquidity rewards are still income, and you remain responsible for reporting them. For how the agencies divide authority over these venues, see the CCS guide on SEC versus CFTC crypto regulation.

Wash sales and the 2025 to 2026 bills

Section 1091 disallows a loss on the sale of “stock or securities” if you buy substantially identical stock or securities within 30 days before or after. Because crypto is property rather than a security, the rule has never applied to it: a taxpayer can sell bitcoin at a loss on Monday, buy it back on Tuesday and deduct the loss. Two cautions: the economic substance doctrine can disallow a transaction with no purpose other than tax, and crypto ETF shares are securities, so wash sale rules do apply to them. Every serious bill of the last two years would close the gap. None is law as of October 6, 2026.

The Lummis bill, July 2025

Introduced on July 3, 2025 as S. 2207, the Lummis bill would create a de minimis exclusion of $300 per transaction with a $5,000 annual cap; extend the wash sale rule and securities-lending nonrecognition to digital assets; permit a mark-to-market election for traders; defer income on mining and staking rewards until sale; and waive appraisals for charitable gifts of actively traded tokens. The Joint Committee on Taxation estimated roughly $600 million in net revenue over 2025 to 2034, because wash sale and mark-to-market raise more than the exclusions give up.

The House package, June to September 2026

After a bipartisan PARITY Act discussion draft from Representatives Max Miller and Steven Horsford in December 2025, Ways and Means released seven narrower drafts on June 4, 2026, including a $10 de minimis for network fees (H.R. 9178), a mining and staking deferral (H.R. 9175) and wash sale and constructive sale rules (H.R. 9172). At the June 9, 2026 hearing, Democrats led by Ranking Member Richard Neal objected to open-ended deferral of staking income. The consolidated bill, H.R. 10357, was introduced on September 14, 2026 and approved 38 to 5 on September 16, 2026. According to The Block and Decrypt, it keeps the $10 fee exemption (with a 2028 start and an exclusion for taxpayers with more than 5,000 transfers a year), extends wash sale and constructive sale rules, provides a stablecoin basis rule for coins trading near redemption value, treats qualifying lending transfers as nonrecognition events, creates a voluntary disclosure program, and classifies mining and staking rewards as ordinary income. The five-year deferral was dropped before the vote, and the bill had not reached the House floor as of October 6, 2026.

The ADAPT Act, September 30, 2026

Senators Steve Daines, Cynthia Lummis, Tim Scott and Bernie Moreno introduced the Aligning Digital Assets with Principles of Taxation (ADAPT) Act on September 30, 2026. It would exempt consumers from recognising gain or loss when paying with regulated dollar stablecoins, relieve gas fees of $10 or less, extend wash sale and constructive sale rules and securities-lending treatment to digital assets, and set sourcing rules for staking and mining income, mostly effective after December 31, 2026. On October 1, 2026, Lummis said she doubted anything on digital asset tax would get done in the lame duck, citing Senate Finance Committee reluctance to reopen the tax code; the CLARITY Act market structure bill had failed a Senate procedural vote 49 to 50 in mid-September 2026.

Stablecoins, NFTs and foreign reporting

Stablecoins after the GENIUS Act

The GENIUS Act, signed July 18, 2025 as Public Law 119-27, created a federal framework for payment stablecoin issuers: one-to-one reserves, licensed issuers, and a prohibition on issuers paying interest to holders. It is a payments law, not a tax law, and did not change the income tax treatment of stablecoins: a USDC balance is still property, each spend or swap is a disposal with a gain or loss of a fraction of a cent per dollar, and each is technically reportable. The safe harbors in H.R. 10357 and the ADAPT Act would end this, but they are not law. Rewards paid by exchanges on stablecoin balances are ordinary income. See the CCS guide on what a stablecoin is.

NFTs as collectibles

Notice 2023-27, issued March 2023, announced a “look-through analysis” for NFTs: if the associated asset is a collectible under Section 408(m), such as art, a gem or a coin, the NFT is a collectible. Collectibles held over a year are taxed at a maximum 28 percent long-term rate, and an IRA that acquires one is treated as having distributed the purchase price. The guidance is not final, and creators have ordinary income on primary sales and royalties.

FBAR and FATCA

FinCEN Notice 2020-2 said the agency intends to amend the FBAR rules to cover virtual currency, but as of the 2026 filing season no final rule exists, so a foreign account holding only crypto is not reportable on FinCEN Form 114. A foreign exchange account that also holds fiat is reportable, and once all your foreign accounts exceed $10,000 in aggregate at any point in the year, every account must be reported, crypto included. As of 2025 the inflation-adjusted maximum penalty is $16,536 per non-willful violation and the greater of $165,353 or half the balance for a willful one. FATCA reporting on Form 8938 is less settled; many practitioners treat crypto at a foreign exchange as a specified foreign financial asset once the form’s thresholds are met. Self-custodied crypto is generally outside both regimes.

State taxes

Most states tax capital gains as ordinary income with no long-term preference: California’s top rate is 13.3 percent, New York’s 10.9 percent and New Jersey’s 10.75 percent. Seven states (Alaska, Florida, Nevada, South Dakota, Tennessee, Texas and Wyoming) have no personal income tax. Washington, with no wage income tax, imposes a 7 percent excise tax on long-term capital gains above a $278,000 standard deduction for 2025 and treats crypto gains as included.

Two newer developments matter. Missouri enacted a 100 percent subtraction for federally reported capital gains for individuals beginning with tax year 2025, making it on paper the first income-tax state to exempt crypto gains, though TokenTax noted in 2026 that implementation guidance has been slow. Illinois enacted a Digital Asset Tax in June 2026 imposing a 0.2 percent charge on the value of digital assets in covered transactions, collected by brokers, effective January 1, 2027; on October 1, 2026 state officials and industry groups jointly asked a court to delay it to July 1, 2027, as CCS reported on October 5, 2026 in this article. A tax on gross transaction value rather than gains is a different animal, and if it survives it will be copied. Moving to a no-tax state before a large sale is legal but heavily audited, so keep proof of where you lived on the date of each major disposal.

How we got here: a timeline

Worked example: three lots, a swap, a reward and an airdrop

How to evaluate your crypto tax position: a checklist

• Do you have a complete list of every wallet and account you controlled? Wallet-by-wallet tracking is impossible without it, and the IRS can see exchange proceeds you forgot about.
• Did you make the January 1, 2025 basis allocation under Rev. Proc. 2024-28? It connects pre-2025 universal records to the new regime. If not, work with a preparer on a defensible reconstruction.
• Does your software’s method match the law? Pooled HIFO across wallets is no longer permissible. Confirm per-wallet tracking and that any specific identification was recorded by the time of each sale.
• Do your Forms 1099-DA reconcile to your Form 8949? Expect proceeds to match and basis to differ for transferred-in and specifically identified lots. Every difference needs an adjustment.
• Have you reported every income event, not just sales? Staking, airdrops, mining, lending interest and referral bonuses are all ordinary income with a date and a dollar value.
• Did you dispose of any NFTs that could be collectibles? The 28 percent rate may apply, and holding one in an IRA can trigger a deemed distribution.
• Do you hold assets at a non-US exchange? Check whether the account also held fiat and whether all foreign accounts together exceeded $10,000 at any time.
• Are you relying on a proposed rule as if it were law? The $10 fee exemption, staking deferral and stablecoin safe harbors are not in force as of October 2026.

Risks and open questions

The largest near-term risk is the data mismatch between brokers and taxpayers. For 2025 the IRS receives proceeds but no basis; for 2026 it receives broker-computed basis that may conflict with the taxpayer’s own identification. Both invite automated CP2000 notices proposing tax on the full proceeds, and taxpayers who left DeFi activity off past returns should expect those gaps to surface as broker data accumulates; the voluntary disclosure program in H.R. 10357 is Congress acknowledging how large that population is.

The second risk is legislative whiplash. If a wash sale rule is enacted with an effective date tied to introduction, as the June 2026 draft H.R. 9172 proposed, loss harvesting executed in late 2026 could be caught. Open questions no ruling has answered include whether wrapping a token is a disposal, how to value illiquid airdrops, and whether depositing into a lending protocol is a sale. And the Notice 2026-20 relief expires December 31, 2026; if it lapses, every specific identification of broker-held units in 2027 must be communicated to the broker by the time of sale, which few exchanges currently support.

What to watch next

Glossary

Adjusted basis

What you paid for a unit including fees, or the amount included in income when you received it. Gain equals proceeds minus adjusted basis.

Collectible

Property such as art, gems or coins under Section 408(m). Long-term gains are taxed at up to 28 percent; some NFTs qualify.

De minimis exclusion

A proposed rule exempting small gains from tax. The Lummis bill uses $300 per transaction; the House and ADAPT bills limit it to fees of $10 or less.

Dominion and control

The IRS test for when received crypto becomes income: the moment you can transfer, sell or otherwise dispose of the units.

FBAR

FinCEN Form 114, required when foreign financial accounts exceed $10,000 in aggregate. Crypto-only foreign accounts are not yet covered.

FIFO

First-in, first-out. The default rule treating the earliest acquired units in a wallet or account as the ones sold.

Specific identification

Choosing which units you are selling, by lot, no later than the time of sale. The alternative to FIFO.

Wallet-by-wallet rule

The requirement from January 1, 2025 that basis be tracked per wallet or account, so only lots in the wallet where the sale occurs can be identified as sold.

Wash sale rule

Section 1091, which disallows a loss on securities repurchased within 30 days. It does not currently apply to digital assets.

Why it matters

Crypto tax in the United States is moving from an honour system to a reported system. For twelve years the IRS depended on taxpayers to volunteer their disposals; from the 2025 tax year it receives broker data, and from 2026 it receives basis. That shift will change behaviour more than any rate or rule, because mismatches are mechanical and letters are cheap. The wallet-by-wallet rule means the sloppy but defensible record keeping of the past decade is now non-compliant, and the Notice 2026-20 extension is a grace period, not a reprieve.

The policy debate is stuck in a familiar place: bipartisan agreement that taxing a $4 gas fee is absurd and that wash sale parity is coming, no agreement on staking, and no floor time. Whichever way Congress goes, the operational conclusion is the same: build per-wallet records now, reconcile to every 1099-DA, and treat proposed relief as a reason to watch, not a reason to assume.

Sources

1. IRS: Final regulations and related IRS guidance for reporting by brokers on sales and exchanges of digital assets, accessed October 6, 2026
2. House Ways and Means Committee: President Trump Signs Resolution Overturning IRS DeFi Broker Rule, April 10, 2025
3. Senator Cynthia Lummis: Lummis Unveils Digital Asset Tax Legislation, July 3, 2025
4. Congressional Research Service: Stablecoin Legislation: An Overview of the GENIUS Act of 2025 (P.L. 119-27), updated August 20, 2026
5. EY Tax News: Temporary relief for identification of digital assets extended through 2026 (Notice 2026-20), March 30, 2026
6. RSM US: IRS extends digital asset broker relief through 2027 under Notice 2025-33, June 2025
7. The Tax Adviser: Navigating the Form 1099-DA reporting maze, March 2026
8. Steptoe: House Ways and Means Committee Releases Draft Crypto Tax Legislation, June 2026
9. The Block: House committee releases sweeping crypto tax bill ahead of Wednesday markup, September 15, 2026
10. Decrypt: Crypto tax bill clears House committee, September 16, 2026
11. Crypto Briefing: Cynthia Lummis doubts a crypto tax bill will pass this year, October 1, 2026
12. Coin Alert News: Senate Republicans Introduce ADAPT Act to Exempt Stablecoin Payments from Crypto Taxes, October 1, 2026
13. US Tax Tools: Capital Gains Tax Rates for 2026 (citing IRS Rev. Proc. 2025-32), 2026
14. TokenTax: State-by-State Crypto Taxes: Where Investors Are Moving in 2026, 2026
15. Taxes for Expats: Crypto FBAR 2026: Do you need to report cryptocurrency on FinCEN Form 114?, 2026
16. Crypto Coin Show: Illinois officials join crypto groups seeking six-month delay for digital-asset tax, October 5, 2026

Disclosure: This guide is for education only and is not investment, legal or tax advice. US tax rules for digital assets change frequently and depend on individual facts; consult a qualified tax professional before filing or acting on anything described here.