Coinbase Unpacks IRS 2026 Rulebook: The Truth About Wallets, Exchanges, and Taxable Events (Exclusive Interview)

Crypto taxation has lengthy been a supply of confusion, and with the IRS inserting digital belongings entrance and heart on tax types, readability has by no means been extra vital.

From the introduction of Form 1099-DA to new necessities for brokers, ETFs, and finally DeFi platforms, the approaching modifications will redefine how people and establishments navigate their crypto tax obligations.

In this interview, Lawrence Zlatkin, Vice President of Tax at Coinbase, outlines what these modifications imply, the frequent misconceptions traders ought to keep away from, and the methods that may assist taxpayers keep compliant whereas minimizing legal responsibility.

What counts as a taxable occasion below the brand new guidelines? For instance, is exchanging one cryptocurrency for an additional, utilizing crypto for items or providers, or transferring crypto between wallets all handled the identical?

The sorts of taxable occasions stay unchanged within the new tax season. So in case you have been paid in crypto, offered your belongings, exchanged cryptocurrencies, or used crypto to pay for items and providers, these are all thought-about taxable occasions by the IRS and will should be accounted for come tax season.

Under the brand new guidelines in 2026, although, Coinbase and different brokers will probably be required to report your crypto gross sales and exchanges to the IRS, and you utilizing the brand new Form 1099-DA for the 2025 tax 12 months. For 2025 transactions, your copy of the shape will show each value foundation and gross proceeds, however Coinbase will report solely gross proceeds to the IRS.

For transactions in and after 2026, your copy will once more show each value foundation and gross proceeds. However, Coinbase will solely report the fee foundation for crypto you bought by means of Coinbase, alongside all gross proceeds.

Moving crypto between wallets just isn’t a taxable transaction since you continue to maintain the identical crypto asset earlier than and after.

Given that many customers have transferred belongings between wallets, exchanges, or acquired crypto effectively earlier than 2025/2026, what methods do you advocate for traders to precisely reconstruct the fee foundation for these non-covered belongings? What information are most vital to protect now?

Ensuring that you just hold information of the worth you bought these belongings, no matter which platform that buy originated, is vital. Make certain to additionally embody all transaction or fuel charges that have been paid as a part of that buy, since these “bills” could also be included in foundation and used to offset future taxable good points.

What secure harbors or steerage exist for traders to decide on their methodology of value foundation allocation

Coinbase clients can handle their value foundation methodology of their tax heart settings throughout the platform. From there, they will at present select between a HIFO (highest in, first out), LIFO (final in, first out), and FIFO (first in, first out) methodology. We all the time urge clients to ensure they seek the advice of a tax skilled earlier than selecting a technique.

Many traders maintain spot Bitcoin ETFs or Ethereum ETFs. Under the brand new IRS reporting laws coming in 2026, how do these ETFs get handled otherwise? What necessities will ETF traders have, and what ought to traders in these ETFs do now to arrange for correct tax reporting of their ETF good points or losses?

Most ETFs will probably be handled as trusts or “look via” entities for the investor. It’s as in case you held the BTC or ETH your self. The ETF or the custodian for the ETF ought to report your gross sales as if you exchanged or offered the crypto asset your self. ETFs are handy for proudly owning crypto belongings, however they won’t change how you might be taxed.

DeFi platforms will probably be handled otherwise. Could you stroll us by means of what precisely DeFi brokers might want to report – and what they gained’t – as soon as the foundations take impact in 2027? Also, what transitional reliefs and timing ought to DeFi customers and DeFi front-end suppliers pay attention to now?

In the absence of reporting from DeFi suppliers, it’s vital for DeFi customers to keep up their private documentation of all transactions with the intention to make tax reporting much less of a headache till 2027 rolls round. DeFi transactions might not be reported to the IRS, however they’re topic to the identical tax guidelines as CeFi transactions, and you’ll need to report your transactions, good points, and losses to the IRS simply as you’ll with CeFi.

Those transacting in DeFi must also be cautious that transactions on centralized exchanges usually are not the one taxable transactions. Personal pockets transactions and DeFi actions can be topic to taxes.

Beyond merely compliance, what authorized methods do traders usually underestimate that may assist reduce crypto tax legal responsibility below these new guidelines?

I encourage every particular person investor to seek the advice of a certified tax skilled for his or her particular circumstances and what’s proper for them, however there are a number of methods which can be usually neglected. Tax-loss harvesting means that you can offset good points by promoting underperforming belongings, whereas selecting the best value foundation methodology will help cut back taxable good points. These each require sturdy record-keeping, however can do some heavy lifting in reducing tax payments.

There are quite a lot of misconceptions floating round within the crypto neighborhood about how taxation works. What are among the commonest myths or rumors you hear about crypto taxes, and are you able to clarify why they’re fallacious and what the realities are?

One large false impression is that many suppose crypto is handled as a foreign money by the IRS, when it truly treats crypto as property. Going again to certainly one of your earlier questions, which means promoting, exchanging, and even utilizing crypto to purchase items can set off taxable occasions.

Another false impression is that you just don’t must pay taxes on crypto transactions if they aren’t reported to the IRS. Not true. Reporting helps you calculate your taxes, and it helps the IRS discover taxpayers who don’t report their revenue. But you alone are liable for your taxes, and reporting is simply a information or software to assist.

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