Filing Crypto Taxes in 2026? Read This First

“Cryptocurrency is taxed like property, not currency,” says the IRS. This means you pay taxes whenever you sell, trade, or receive crypto as income. For 2025 crypto activity, tax returns are due in 2026, and understanding the rules is essential.

 

Many taxpayers also rely on personal tax services in Southern California or other regions to ensure proper compliance.

 

How the IRS Treats Crypto Gains and Income

 

The IRS treats digital assets like Bitcoin or Ethereum as property. This affects how gains and income are taxed:

 

1. Selling crypto for more than you paid creates a capital gain.

2. Selling for less results in a capital loss.

3. Receiving crypto as payment or mining rewards counts as ordinary income, based on its fair market value in USD at the time received.

 

All calculations use the cost basis, which is the amount you originally paid for the crypto in dollars. The gain is simply the sale price minus the cost basis.

 

Short-Term vs. Long-Term Gains

 

The IRS distinguishes between short-term and long-term holdings:

 

1. Short-term gains: If you hold crypto for a year or less, gains are taxed at your regular income tax rates, which can range from 10% to 37%.

2. Long-term gains: If you hold crypto for over a year, the gains are taxed at a lower rate, generally 0% to 20%.

 

This distinction can significantly affect your tax bill.

 

Key Forms You’ll Need

 

When filing in 2026, several IRS forms are important for crypto reporting:

 

1. Form 1040: You must answer the IRS question about digital assets if you sold, traded, or received crypto.

2. Form 8949: Lists each crypto sale, trade, or taxable event. You report dates, proceeds, cost basis, and gains or losses.

3. Schedule D: Totals the gains and losses reported on Form 8949.

4. Schedule 1 & Schedule C: Report crypto received as income. If it’s business-related, use Schedule C.

 

Accurate reporting on these forms ensures your taxes match IRS records.

 

New Reporting Rules for 2025 and 2026

 

The IRS has updated how brokers report crypto transactions:

 

1. Form 1099-DA will replace older forms.

2. Brokers must report gross proceeds from sales to both you and the IRS.

3. Starting in 2026, brokers must also report cost basis, making it easier for the IRS to verify gains.

 

These updates make it critical to keep good records and confirm that your broker’s reports match your own.

 

Deadlines to Remember

 

For 2025 crypto activity, key deadlines in 2026 include:

 

1. Jan 31, 2026: Receive Form 1099-DA from brokers.

2. April 15, 2026: Standard tax return and payment deadline.

3. Oct 15, 2026: Extended filing deadline if you requested more time.

 

For California taxpayers living abroad or earning crypto internationally, understanding international tax California rules is important. Residents must report foreign income or crypto holdings on state returns, and failing to do so can lead to penalties.

 

Penalties for Noncompliance

 

Failing to report crypto correctly can lead to penalties:

 

1. Fines for failure to file or failure to pay.

2. Interest on unpaid taxes.

3. In cases of large errors or fraud, criminal charges are possible.

 

Accuracy is crucial because IRS systems cross-check exchange reports with taxpayer filings.

 

State Tax Considerations

 

Crypto taxation isn’t just federal. States like California tax crypto gains and income too. Using personal tax services in Southern California can help manage both federal and state obligations accurately.

 

Keeping Records

 

Good records are essential. Keep track of:

 

1. Dates and amounts of every crypto transaction.

2. Purchase prices and sale proceeds in USD.

3. Fees, wallet addresses, and exchange records.

 

Proper documentation helps prevent errors and ensures smooth filing.

 

Stay Compliant with Professional Help

 

Filing crypto taxes in 2026 for 2025 activity can be challenging. The IRS treats digital assets as property, so every sale, trade, or income event must be reported precisely. California state tax rules add another layer of complexity.

 

Anu Agrawal CPA, in Southern California, provides expert guidance for individuals and businesses navigating both federal and state requirements. Their personal tax services in Southern California ensure accurate reporting, on-time filings, and minimal risk of errors.

 

Contact Anu Agrawal CPA today to get expert help and file your crypto taxes with confidence.

 

Still Got Questions? Here Are The Answers

 

Q: How does the IRS classify cryptocurrency for tax purposes?

A: The IRS treats cryptocurrency as property, not currency. This means every sale, trade, or income event may trigger capital gains or income tax.

Q: Do I need to report every crypto transaction?

A: Yes. All taxable events, including sales, trades, and crypto received as income, must be reported accurately on your federal tax return.

Q: What forms do I need to file crypto taxes in 2026?

A: Common forms include Form 1040 (digital asset question), Form 8949 (sales/trades), Schedule D (capital gains/losses), and Schedule 1 or C for crypto income.

Q: What happens if I don’t report crypto correctly?

A: Inaccurate reporting can lead to IRS penalties, interest, or audits. Professional help can reduce errors and ensure accurate filings.

Q: When are crypto tax filings due?

A: For 2025 crypto activity, standard federal and state filings are due April 15, 2026, with extensions available until October 15, 2026.