What Every Crypto Investor Needs to Know Before Filing in 2026
The past year in crypto was defined by its growing maturity as an asset class.
Behind the headlines, the infrastructure around digital assets continued to evolve. Exchanges are rolling out new reporting standards like Form 1099-DA. Regulators are paying closer attention. And for everyday investors, that means one thing…
Crypto taxes are becoming more visible, more structured – and in many cases, more complicated.
For those who’ve bought, sold, traded, or earned crypto over the past year, tax season can raise more questions than answers. What needs to be reported? What records matter? What happens if your exchange data doesn’t match your own?
That’s exactly why we publish this annual Crypto Tax Q&A.
Now in its 8th year, we’ve once again partnered with leading crypto tax professionals to answer real questions submitted by investors like you. The goal is simple: help you better understand the rules, avoid common pitfalls, and walk into conversations with your tax professional better prepared.
We hope the answers below are helpful as you prepare your 2025 tax returns (the deadline is April 15, 2026). You may also find last year’s Crypto Tax Q&A useful for additional context.
To learn more about the cryptocurrency tax professionals who contributed, you can find their bios at the bottom of this article.
And one important reminder: While crypto tax reporting can be a hassle, they’re optional. Owning cryptocurrency in a Digital IRA simplifies things significantly over the long term.
Note: Consult a qualified tax professional for advice specific to your situation. The purpose of this Q&A is to help you ask better questions – not to replace professional guidance.
General Crypto Taxation
“Are unrealized crypto gains taxable? AND How are crypto gains treated inside a Roth or SEP IRA? Possibly also: What are general considerations when holding crypto in a trust?“
Unrealized gains are not taxable. You only owe tax when you sell, trade, or otherwise dispose of the asset. Holding crypto that has gone up in value creates no tax obligation on its own
Inside a Roth IRA, gains are completely tax-free as long as you follow the withdrawal rules. Inside a SEP IRA, gains are tax-deferred, so you’ll pay ordinary income tax when you take distributions in retirement. The catch is that most major crypto exchanges don’t offer IRA accounts directly, so you’d need to work through a self-directed IRA custodian, which adds complexity and fees.
For trusts, the tax treatment depends on the trust structure. Revocable trusts are generally ignored for tax purposes – the grantor reports everything. Irrevocable trusts file their own returns and can reach the highest tax brackets quickly, since trust income thresholds are compressed. If you hold significant crypto in a trust, the tax planning around distributions and gains matters a lot.
Justin, Crypto Tax Specialist
“When are exchanges required to issue Form 1099-DA? What should investors do if they haven’t received it by the deadline?“
Form 1099-DA is the new crypto reporting form that brokers, including centralized exchanges, are required to issue to both you and the IRS for covered transactions. Exchanges are required to issue it for the 2025 tax year and beyond, with forms due to recipients by January 31.
More importantly: don’t wait for it. Your obligation to report crypto gains doesn’t depend on receiving a 1099-DA. The IRS is getting a copy regardless, so if your return doesn’t match what the exchange reports, that’s a problem.
Joel, Elevated Tax Strategies
“How are crypto scam losses treated for tax purposes? Are these losses deductible? What documentation will I need to provide?“
Unfortunately, the Tax Cuts and Jobs Act of 2017 significantly limited theft loss deductions for individuals. Most personal theft losses, including crypto scams, are no longer deductible through 2025 unless they qualify as a federally declared disaster. In most cases, they don’t.
There’s an exception worth knowing: if your loss occurred through a fraudulent investment scheme that qualifies as a Ponzi scheme under IRS guidance (Revenue Procedure 2009-20), a deduction may be available. This has a specific set of requirements and involves a lead thief who has been charged or indicted.
If you believe your situation might qualify, document everything: screenshots of the platform, communications, wallet addresses, transaction records, and any law enforcement reports. Even if a deduction isn’t available, thorough documentation protects you if the IRS ever questions the missing assets.
Justin, Crypto Tax Specialist
Crypto Retirement Accounts
“What if your exchange only provides monthly statements, how do I fill out my taxes?“
Monthly statements are workable, but they’re not ideal. The IRS requires you to report each transaction individually on Form 8949, not just monthly summaries.
The best approach is to contact the exchange and request a full transaction history export, even if their default reporting is monthly. Most platforms have this available somewhere in the account settings. If they truly don’t provide it, you’ll need to reconstruct individual transactions from the monthly data as best you can, noting dates, amounts, and values at the time of each transaction.
If records are genuinely incomplete, document your reconstruction process. Reasonable estimates based on available data are better than nothing, but we always prefer to work from the actual transaction history.
Joel, Elevated Tax Strategies
Tax Reporting & Compliance
“Are crypto held on foreign exchanges considered “foreign investments”?
Potentially, yes, and this is one of the more overlooked compliance issues for crypto investors.
If you hold crypto on a foreign exchange, you may have reporting obligations beyond your regular tax return. Specifically: if the aggregate value of your foreign financial accounts exceeds $10,000 at any point during the year, you’re required to file an FBAR (FinCEN Form 114). If the value is higher, FATCA reporting on Form 8938 may also apply.
Whether crypto on a foreign exchange technically qualifies as a “foreign financial account” is still an evolving area – the IRS has indicated it intends to treat it that way. The safe approach is to disclose. Penalties for failing to file FBAR can be severe, even if the failure was unintentional.
Joel, Elevated Tax Strategies
“What records should crypto investors keep throughout the year?”
Ideally, you should keep records that allow us to reconstruct the full history of each transaction. The most helpful records include:
- Full transaction history exports from each exchange you use (CSV files are best)
- Records of transfers between exchanges or to/from self-custody wallets
- Wallet addresses used for self-custody
- Records of purchases, sales, swaps, and staking rewards
- Documentation of the USD value of transactions at the time they occurred
- Any fees paid on transactions
In practice, the easiest approach is to periodically export your complete transaction history from each exchange and keep it saved locally. This ensures we can recreate your cost basis and gains even if the exchange later limits historical access.
Colby, Colby Cross CPA
“Can I claim losses for sales of altcoins on exchange to buy bitcoin?“
Yes, if you have an alt coin and trade it for another crypto like Bitcoin, that is a taxable event that triggers either a capital gain or loss. If that alt coin had dropped in value since it was first acquired, a capital loss would be recognized.
Colby, Colby Cross CPA
Crypto Income & Payroll
“If I am paid in crypto for freelance or contract work, how do I report it, and do I need to pay self-employment tax?”
When you receive crypto for services, it’s treated just like getting paid in dollars.
For example: Let’s say you complete a project and receive bitcoin worth $1,000 at the time of payment – that $1,000 is your income, regardless of what happens to bitcoin’s value afterward.
Think of cryptocurrency payments like receiving payment in foreign currency, you need to “convert” it to USD for tax purposes.
- You’ll owe the 15.3% self-employment tax (12.4% Social Security + 2.9% Medicare)
- You can deduct 50% of this tax on your tax return
- Report everything on Schedule C (Form 1040) for your business income
If you later sell the crypto, you might have additional tax implications. For example, if you received $1,000 in bitcoin and later sold it for $1,200, you’d have:
- The original $1,000 as self-employment income
- A $200 capital gain to report on Form 8949 and Schedule D
Justin, Crypto Tax Specialist
“My 1099-DA doesn’t match my own transaction history. Why would that happen?“
This is very common and usually happens for a few reasons:
- Exchanges only report activity that occurred on their platform, so transfers to or from other exchanges or wallets may not be reflected correctly.
- Cost basis information is often incomplete because the exchange may not know where the assets were originally purchased.
- Some transfers or internal swaps can cause the exchange report to look different from your full transaction history.
For tax reporting, we typically rely on the complete transaction history across all exchanges and wallets to calculate the correct gains and losses. The Form 1099-DA is still important because the IRS receives a copy, but it often reflects only part of the picture.
When preparing your return, I reconcile the information reported on the 1099-DA with your full transaction history to ensure everything is reported accurately.
Colby, Colby Cross CPA
Other Crypto Tax Questions
“I moved exchanges twice this year and have two self-custody wallets. What’s the best way to reconcile everything?“
When crypto moves across multiple exchanges and wallets, the key is to treat everything as one combined ledger of transactions rather than separate accounts.
The best process is:
- Export transaction history from each exchange.
- Import those files into crypto tax software (such as CoinLedger, Koinly, etc.).
- Add your self-custody wallets using wallet addresses so the software can pull those transactions.
- The software will then link transfers between your accounts so they are not mistakenly treated as taxable sales.
Once everything is imported into one system, it can calculate the correct cost basis and capital gains across all platforms.
Colby C, Colby Cross CPA
Tax Specialist Bios
A special thanks to all the crypto tax professionals who answered your additional questions for the 2025 tax season. Below is the professional background information of each specialist.
Colby Cross, Colby Cross CPA
Colby Cross is a licensed CPA based out of Seattle, Washington. He is an expert in cryptocurrency taxation and offers a complete array of tax services for his clients, including tax preparation and planning. Additionally, he enjoys educating and commonly speaks at conferences and seminars and has been featured in the Washington Post.
Justin McCormick, Crypto Tax Specialist
Justin McCormick is a seasoned expert in cryptocurrency taxation and compliance, bringing a unique blend of technical and legal expertise to the field. With a bachelor’s degree in computer science and a Juris Doctorate in Law, he is exceptionally well-equipped to help clients accurately calculate their tax obligations and navigate the ever-evolving complexities of cryptocurrency regulations.
Joel S, Elevated Tax Strategies
Joel is Founder and CEO of Elevated Tax Strategies a firm that puts serving through education, expertise, & excellence as top priority. Leading a full-service firm that specializes in cryptocurrency taxation and complex digital asset strategies. With extensive experience in both traditional tax planning and emerging digital currencies.
Jason M. Tyra, Jason M. Tyra, PLLC
Jason M. Tyra is a Certified Public Accountant licensed to practice in the States of Texas and New York, an Attorney licensed to practice in Texas, and an ACFE Certified Fraud Examiner. Jason is a member of the Texas Society of Certified Public Accountants, the American Institute of Certified Public Accountants (AICPA), the Association of Certified Fraud Examiners (ACFE), the American Bar Association, and the Dallas Bar Association.
Note: The information presented in the article above is intended for educational purposes only. It is in no way meant to offer financial advice, and specific guidance about how to properly pay taxes in each individual case should be sought from a certified accounting professional.
Looking for CPA Crypto professionals that might be able to help with your taxes? Check out our growing directory of professionals.
If there’s one clear takeaway from this year’s Q&A, it’s this: crypto tax reporting is becoming more complex. Between changing regulations, new requirements like the 1099-DA and the challenge of tracking activity across multiple platforms and wallets, staying compliant requires more time, better records and often professional guidance.
Remember, you can choose to hold digital assets within a tax-advantaged Digital IRA. Then you can trade to your heart’s content without worrying about tracking cost basis for every single transaction.
While a Digital IRA isn’t right for everyone, you should understand the different ways digital assets like cryptocurrencies are treated in different account types. You’re already diversifying your savings, why not take advantage of a Digital IRA’s tax-advantaged status, too? Learn more here, or start your due diligence by requesting your free copy of the Essential Guide to Digital IRAs.