In the past, crypto investors had it relatively easy. You could connect your exchanges and wallets to a tax software, generate a report, and file your return without worrying too much about precision. But starting in 2025, that’s changing significantly.

The Internal Revenue Service (IRS) has introduced new crypto tax regulations aimed at tightening compliance and ensuring accurate reporting of digital asset transactions. These include the introduction of Form 1099-DA and the wallet-by-wallet cost basis rule, both of which will completely redefine how crypto income and gains are reported.

For investors, these changes mean one thing: more transparency, more data sharing, and less margin for error. Whether you trade occasionally or manage multiple wallets across exchanges, understanding these new rules is essential before tax season begins. At 7 Crypto Tax Accountants, we specialize in helping investors navigate these complex regulatory shifts.

The Evolution of Crypto Taxation

Before 2025, crypto taxation in the U.S. was built on a patchwork of guidance. The IRS treated cryptocurrencies as property, which meant investors had to report gains or losses whenever they sold, swapped, or spent their crypto. However, exchanges were not required to report transaction-level data to the IRS, leaving room for inconsistencies and underreporting.

That gap is now closing.

Starting in January 2025, digital asset brokers including major exchanges and certain wallet providers will begin reporting user data directly to the IRS. This marks a major step toward standardized oversight, similar to what already exists for traditional financial instruments like stocks and bonds.

Old Rules vs. New Rules (Quick Comparison)

This transition represents a new era of data transparency and traceability in the crypto market. The IRS aims to make tax compliance easier to verify and much harder to avoid. For investors, the key takeaway is that every transaction now matters, and your reporting accuracy will soon be cross-checked automatically.

Understanding Form 1099-DA

To improve compliance, the IRS is rolling out Form 1099-DA (Digital Assets) the crypto equivalent of the traditional 1099-B form used for securities.

What is it?

Form 1099-DA will report your digital asset transactions including sales, exchanges, and certain transfers directly to the IRS. This means every time you sell or trade crypto through a registered broker, that information will automatically be sent to the tax authority.

Who must issue it?

Starting January 2025, crypto exchanges, brokers, and some wallet providers will be required to issue Form 1099-DA to both users and the IRS. If you use centralized exchanges like Coinbase, Kraken, or Gemini, expect to receive one by early 2026 for the 2025 tax year.

If you are unsure how this affects your portfolio, consider consulting a specialist crypto tax accountant.

What information will it include?

• Type of digital asset
• Date acquired and sold
• Sale proceeds and cost basis
• Wallet or exchange ID
• Customer identification details

Form 1099-DA Timeline

Wallet-by-Wallet Cost Basis Rule

One of the most significant and complex changes taking effect in 2025 is the introduction of the wallet-by-wallet cost basis rule. This update redefines how crypto investors calculate their gains and losses, directly impacting how much capital gains tax they owe.

Previously, investors could use aggregate cost basis methods, such as pooling or flexible identification (FIFO, LIFO, HIFO), across multiple wallets and exchanges. This made it easier to minimize taxable gains and simplify reporting.

From January 1, 2025, however, the IRS requires taxpayers to calculate the cost basis for each individual wallet or account separately. This rule aims to prevent users from mixing transaction data across platforms and to increase transparency in crypto reporting.

What Does “Wallet-by-Wallet” Mean?

Under the new rule, every wallet you own whether it’s on an exchange like Binance or a hardware wallet like Ledger must be treated as an independent entity for tax purposes.

How Exchanges Will Report Under the New Law

The new crypto tax regulations for 2025 significantly expand the IRS definition of a “broker.” This means that more digital asset platforms from centralized exchanges to certain wallet providers will now have reporting obligations similar to traditional financial institutions.

Who Qualifies as a Broker in 2025?

• Centralized exchanges (e.g., Coinbase, Kraken, Gemini)
• Custodial wallet providers that execute transactions for users
• Certain DeFi platforms or intermediaries that process digital asset trades
• Payment processors that convert crypto to fiat on behalf of users

However, the IRS has also clarified that non-custodial wallets such as Ledger, Trezor, or MetaMask are not currently required to report transactions, since they don’t act as intermediaries. That said, as DeFi evolves, future updates could extend these requirements further.

What Transactions Are Taxable in 2025

As the IRS expands its digital asset reporting framework, understanding which crypto transactions are taxable has never been more important. Under the new 2025 rules, nearly all crypto disposals or exchanges can trigger a taxable event even if you don’t convert your crypto back to fiat.

DeFi Transactions and Grey Areas

While centralized exchanges will now report most taxable transactions, DeFi activity remains a complex area. Many DeFi protocols don’t currently issue user-level data or forms, leaving investors responsible for self-reporting. To ensure you don’t miss anything, check our guide on compliance and penalties.

NFTs and New Digital Asset Categories

The IRS now officially classifies NFTs as digital assets, meaning they fall under the same reporting and taxation framework as cryptocurrencies.

• Buying an NFT → Not taxable (until resale).
• Selling or trading an NFT → Taxable gain or loss.
• Minting NFTs → Could trigger self-employment income if done commercially.

How to Stay Compliant

1. Track every transaction even small ones.
2. Use tax tools that integrate with DeFi platforms and NFT marketplaces.
3. Record the fair market value (in USD) at the time of each transaction.
4. Keep receipts, screenshots, and transaction hashes for verification.
5. Report income and capital gains separately on your tax return.