TL;DR
- Crypto investors face complex tax rules, especially when trading across multiple exchanges or wallets.
- No wash-sale rules in crypto mean more opportunities for tax-loss harvesting.
- Cost basis tracking is manual, particularly for decentralized trades or self-custodied assets.
- Advisors should leverage crypto-specific tax software or hire specialists to manage reporting.
- New IRS reporting rules like Form 1099-DA and wallet-level cost basis will take effect in 2026.
Tax Preparation in the Crypto Era Isn’t Optional
The rapid growth of digital assets and the expanding use of both centralized and decentralized platforms are forcing financial advisors to rethink tax strategies for their clients. According to Bryan Courchesne, CEO of DAIM, crypto trading involves dozens of taxable events, even when investors don’t realize it.
From airdrops and staking rewards to token swaps and bridging events, the IRS treats all these as realized transactions. Yet, unlike traditional finance, crypto lacks uniform reporting systems, creating a high risk of non-compliance.
No Wash-Sale Rule, But More Complexity
Unlike equities, crypto assets aren’t currently subject to wash-sale rules, making them ideal for tax-loss harvesting. Investors can sell at a loss to offset gains and immediately repurchase the asset without penalties.
However, crypto’s flexibility introduces new complications:
- No standardized 1099s across platforms.
- Cost basis doesn’t carry over between wallets or platforms.
- Manual tracking is essential, especially across DEXs like Uniswap or Jupiter.
Failing to log transactions properly may lead to missed deductions, overstated gains, or even IRS audits.
The Data
| Tax Factor | Crypto Assets | Traditional Assets | Source |
| Wash-sale Rule | Not applicable | Applies to stocks and mutual funds | Investopedia |
| Cost Basis Transfer | Manual, platform-dependent | Automatically updated between brokers | IRS Guidance |
| Tax Forms (as of 2025) | 1099-DA (incoming), limited CEX support | 1099-B, 1099-DIV, 1099-INT | CoinDesk |
| Wallet-Level Reporting | Mandatory from 2025 | Not required | Akif CPA |
| Audit Defense Needs | High for active DeFi users | Moderate | DAIM |
Centralized vs. Decentralized: Tracking Challenges
On centralized exchanges (CEXs) like Coinbase, Kraken, or Binance, users may receive end-of-year tax reports, but these are often incomplete. More troubling, when assets are moved between exchanges, the cost basis doesn’t follow, requiring meticulous self-reporting.
On decentralized exchanges (DEXs) like Uniswap, no tax documentation is generated at all. This means users must manually log every interaction — swaps, bridges, LP positions — and determine the fair market value at the time of transaction.
Even missed losses may prevent proper deductions. Worse, inaccurate reports increase audit risk.
What Investors Should Do Now
To avoid a nightmare at tax time, financial advisors and investors should follow a proactive strategy:
- Use crypto tax software like CoinTracker, Koinly, or TokenTax from the beginning of the year.
- Download all transaction logs from CEXs and wallets regularly.
- Consult a crypto-specialized CPA, especially one familiar with DeFi and cross-chain activity.
- Track all wallet addresses — starting in 2025, IRS rules will require wallet-level reporting.
- Prepare for Form 1099-DA, which will begin appearing in 2026 for digital asset transactions.
Ask an Expert: Insights from Akif CPA
Saim Akif, founder of Akif CPA, highlights major differences between crypto and traditional finance:
- Wallet-level cost basis tracking becomes mandatory in 2025.
- Most platforms don’t support reporting for self-custodied wallets.
- New compliance tools will combine DeFi tax accounting, audit protection, and advisory services.
“Smart CPAs are offering premium services that go beyond tax prep — they’re building real-time audit defense tools,” Akif explains.
What About Staking, NFTs, and Airdrops?
These asset classes each carry unique tax implications:
- Staking rewards are taxed as income when received and as capital gains/losses when sold.
- NFTs are typically taxed as collectibles (up to 28%) if held long-term.
- Airdrops may be treated as ordinary income based on fair market value at the time of receipt.
Failure to categorize these events properly could result in overpayment or compliance violations.
Preparing for What Comes Next
The IRS and Treasury Department have signaled a clear intent to close crypto tax loopholes, with the Infrastructure Investment and Jobs Act laying the legal groundwork for expanded reporting.
By 2026:
- Exchanges will issue Form 1099-DA
- Wallet-level transparency will be expected
- Automated audit flags will scan inconsistencies across self-reported vs. platform-provided data
Investors and advisors who begin preparing now will avoid expensive surprises.
Closing Thought
Crypto investors no longer have the luxury of “figuring it out in April.” With new tax enforcement measures incoming, tracking every asset across every wallet and exchange is not just smart — it’s necessary. Whether you’re a full-time trader or casual holder, 2025 is the year to professionalize your tax approach.
