Crypto taxation has long been a source of confusion, and with the IRS placing digital assets front and center on tax forms, clarity has never been more important.
From the introduction of Form 1099-DA to new requirements for brokers, ETFs, and eventually DeFi platforms, the coming changes will redefine how individuals and institutions navigate their crypto tax obligations.
In this interview, Lawrence Zlatkin, Vice President of Tax at Coinbase, outlines what these changes mean, the common misconceptions investors should avoid, and the strategies that can help taxpayers stay compliant while minimizing liability.
What counts as a taxable event under the new rules? For example, is exchanging one cryptocurrency for another, using crypto for goods or services, or moving crypto between wallets all treated the same?
The kinds of taxable events remain unchanged in the new tax season. So if you were paid in crypto, sold your assets, exchanged cryptocurrencies, or used crypto to pay for goods and services, these are all considered taxable events by the IRS and will need to be accounted for come tax season.
Under the new rules in 2026, though, Coinbase and other brokers will be required to report your crypto sales and exchanges to the IRS, and you using the new Form 1099-DA for the 2025 tax year. For 2025 transactions, your copy of the form will display both cost basis and gross proceeds, but Coinbase will report only gross proceeds to the IRS.
For transactions in and after 2026, your copy will again display both cost basis and gross proceeds. However, Coinbase will only report the cost basis for crypto you purchased through Coinbase, alongside all gross proceeds.
Moving crypto between wallets is not a taxable transaction since you still hold the same crypto asset before and after.
Given that many users have transferred assets between wallets, exchanges, or acquired crypto well before 2025/2026, what strategies do you recommend for investors to accurately reconstruct the cost basis for those non-covered assets? What records are most important to preserve now?
Ensuring that you keep records of the price you purchased those assets, regardless of which platform that purchase originated, is key. Make sure to also include all transaction or gas fees that were paid as part of that purchase, since those “expenses” may be included in basis and used to offset future taxable gains.
What safe harbors or guidance exist for investors to choose their method of cost basis allocation
Coinbase customers can manage their cost basis method in their tax center settings within the platform. From there, they can currently choose between a HIFO (highest in, first out), LIFO (last in, first out), and FIFO (first in, first out) method. We always urge customers to make sure they consult a tax professional before choosing a strategy.
Many investors hold spot Bitcoin ETFs or Ethereum ETFs. Under the new IRS reporting regulations coming in 2026, how do these ETFs get treated differently? What requirements will ETF investors have, and what should investors in these ETFs do now to prepare for accurate tax reporting of their ETF gains or losses?
Most ETFs will be treated as trusts or “look thru” entities for the investor. It’s as if you held the BTC or ETH yourself. The ETF or the custodian for the ETF should report your sales as though you exchanged or sold the crypto asset yourself. ETFs are convenient for owning crypto assets, but they will not change how you are taxed.
DeFi platforms will be treated differently. Could you walk us through what exactly DeFi brokers will need to report – and what they won’t – once the rules take effect in 2027? Also, what transitional reliefs and timing should DeFi users and DeFi front-end providers be aware of now?
In the absence of reporting from DeFi providers, it’s important for DeFi users to maintain their personal documentation of all transactions in order to make tax reporting less of a headache until 2027 rolls around. DeFi transactions may not be reported to the IRS, but they are subject to the same tax rules as CeFi transactions, and you will need to report your transactions, gains, and losses to the IRS just as you would with CeFi.
Those transacting in DeFi should also be wary that transactions on centralized exchanges are not the only taxable transactions. Personal wallet transactions and DeFi activities can also be subject to taxes.
Beyond simply compliance, what legal strategies do investors often underestimate that can help minimize crypto tax liability under these new rules?
I encourage each individual investor to consult a qualified tax professional for their specific circumstances and what’s right for them, but there are several strategies that are often overlooked. Tax-loss harvesting allows you to offset gains by selling underperforming assets, while choosing the right cost basis method can help reduce taxable gains. These both require strong record-keeping, but can do some heavy lifting in lowering tax bills.
There are a lot of misconceptions floating around in the crypto community about how taxation works. What are some of the most common myths or rumors you hear about crypto taxes, and can you explain why they are wrong and what the realities are?
One big misconception is that many think crypto is treated as a currency by the IRS, when it actually treats crypto as property. Going back to one of your earlier questions, this means that selling, exchanging, or even using crypto to buy goods can trigger taxable events.
Another misconception is that you don’t have to pay taxes on crypto transactions if they are not reported to the IRS. Not true. Reporting helps you calculate your taxes, and it helps the IRS find taxpayers who don’t report their income. But you alone are responsible for your taxes, and reporting is only a guide or tool to help.
