IRS Rule Changes in 2026: What Bitcoin, Ethereum, and XRP Traders Need to Know

The Internal Revenue Service is preparing to roll out major cryptocurrency reporting changes in 2026 that will directly impact Bitcoin, Ethereum, XRP, and other digital asset traders across the United States. These updates mark one of the most significant shifts in crypto tax oversight to date and signal tighter enforcement and greater transparency.

Cost Basis Reporting Becomes Mandatory

Beginning January 1, 2026, cryptocurrency brokers will be required to report not only the gross proceeds of digital asset sales, but also the original cost basis of those assets. This information will be submitted to the IRS and taxpayers using a newly established reporting document.

Until now, exchanges generally reported only the total sale amount, leaving investors responsible for calculating gains or losses on their own. Under the new rules, the IRS will be able to directly compare reported cost basis with sale prices, making underreporting far easier to detect.

This change applies to major cryptocurrencies such as Bitcoin, Ethereum, and XRP when traded on custodial platforms like centralized exchanges.

New Reporting Form for Crypto Transactions

A new IRS form dedicated to digital assets will become standard. This form will summarize cryptocurrency sales, exchanges, and disposals for the year. Copies will be sent to both the taxpayer and the IRS, similar to how stock trades are currently reported.

For transactions made in 2026 and beyond, this form will include cost basis data. This means taxpayers will need to ensure their records match what exchanges report to avoid discrepancies that could trigger audits or penalties.

No Wallet Disclosure Requirement

Despite online rumors, the IRS is not requiring taxpayers to list crypto wallet addresses, public keys, or private keys on their tax returns. However, traders who use self-custody wallets or decentralized platforms are still responsible for accurately tracking and reporting their own transactions.

The lack of automatic reporting for decentralized activity places the burden entirely on the individual to maintain complete records.

Trading Strategy Now Affects Taxes More Than Ever

With cost basis reporting becoming automatic, the method used to calculate gains—such as first-in-first-out or specific identification—will have a direct impact on tax liability. If traders do not provide clear instructions to their exchange, a default method may be applied, which could result in higher reported gains.

Tax professionals recommend that crypto investors review and select a preferred accounting method before the new rules take effect.

Recordkeeping Is Critical

As IRS oversight increases, accurate recordkeeping is no longer optional. Traders should maintain detailed logs of purchase dates, sale dates, transaction values, wallet transfers, and crypto-to-crypto trades. Missing or inaccurate records could lead to mismatches between taxpayer filings and IRS data.

Stronger Enforcement Ahead

The IRS has made it clear that enforcement will intensify as reporting improves. Penalties for inaccurate reporting may include fines, interest charges, and potential audits. The agency is expected to rely heavily on automated matching systems to flag inconsistencies.

What Isn’t Changing

Cryptocurrency will continue to be treated as property under U.S. tax law, meaning most transactions remain subject to capital gains rules. There are no new exemptions for long-term holders, and simply owning crypto does not create a tax obligation—only selling, trading, or disposing of it does.

What Traders Should Do Now

Experts advise crypto investors to organize past transaction histories, especially for trades made before 2026 when cost basis reporting was not standardized. Choosing a clear accounting method and consulting tax professionals familiar with digital assets can help reduce risk as the new rules approach.

As cryptocurrency continues to move closer to traditional financial markets, the IRS’s 2026 rule changes mark a turning point for how digital assets are tracked, reported, and taxed in the United States.