The IRS has recently introduced new tax reporting rules for cryptocurrency brokers, which are set to take effect in 2025. This framework requires crypto brokers, hosted wallet services, and digital asset outlets to file 1099 tax forms to report gains made on their users’ digital assets. These assets include coins, tokens, NFTs, and stablecoin transactions above a certain threshold.
It is important to note that the new framework does not currently cover decentralized finance and non-hosted wallets. However, regulations for these areas are expected to be implemented later in the year. The focus for now is on large centralized firms.
Users who earn less than $10,000 worth of stablecoins in a year are exempt from reporting. Additionally, crypto brokers have the option to report stablecoin sales as an aggregate, but they must report individual sales that are sophisticated and high-volume separately.
For NFTs, users do not need to report sales proceeds under $600 in a financial year. However, starting in 2026, crypto brokers will be required to maintain a record of the cost basis for all assets, including the purchase prices of the assets by users. Real estate transactions that are settled with cryptocurrency will also be reported using the fair market value of the digital assets used.
The new regulations aim to bring more transparency and accountability to the cryptocurrency market. By requiring tax reporting from crypto brokers and other service providers, the IRS hopes to ensure that individuals and businesses are accurately reporting their gains and complying with tax laws.
As the cryptocurrency market continues to evolve and expand, it is essential for regulators to keep pace with these changes. The IRS’s new framework is a step in the right direction towards creating a more regulated and transparent cryptocurrency ecosystem.
In the coming years, we can expect further developments in tax reporting for decentralized finance and non-hosted wallets. It is crucial for individuals and businesses involved in the cryptocurrency space to stay informed about these changes and ensure compliance with tax regulations to avoid any potential penalties or legal issues.