Crypto Tax: US, EU, and UK Reference

Why crypto tax matters more in 2026

US CEXs now issue Form 1099-DA (Form 1099-DA is the IRS digital-asset broker form for crypto sales reporting starting tax year 2025) reporting your crypto gross proceeds directly to the IRS (IRS is the US Internal Revenue Service). Cost-basis reporting on covered assets starts with 2026 transactions. Active DeFi users can generate 1,000-10,000 taxable events a year. Last verified: 2026-05-27.

Form 1099-DA reporting is the single largest enforcement upgrade in US crypto tax history. Coinbase, Kraken, Robinhood Crypto, Gemini, and Fidelity Digital Assets all filed 1099-DA forms in early 2026 covering every retail trader's 2025 gross proceeds. Those figures now sit in the IRS Information Returns Master File waiting to be matched against 2026 filings. CP2000 mismatch notices for tax year 2025 will start landing in Q4 2026.

Starting tax year 2025 (filed April 2026), US CEXs must issue Form 1099-DA reporting gross crypto proceeds directly to the IRS, per IRS final regulations. For 2025 transactions, only gross proceeds are reported — cost basis is optional for brokers this cycle. Starting with 2026 transactions, brokers must also report adjusted basis on covered assets (those acquired on or after January 1, 2026 and held continuously at the same broker). Assets transferred in from self-custody wallets are non-covered: basis shows as unknown, and IRS regulations treat $0 as the default unless you document the actual basis.

Three rules every crypto holder must know: (1) every crypto-to-crypto trade is a taxable event — no exceptions, no "like-kind" treatment since 2018; (2) the wash-sale rule still does not apply to crypto in 2026, so December is harvest season; (3) DeFi is taxable and the April 2025 rescission of the DeFi broker reporting rule changed the paperwork burden on front-ends, not your tax liability.

Quick country overview

The US, UK, France, Japan, Canada, and Australia all tax crypto. Germany, Portugal (over 1 year), Singapore, and UAE charge 0% individual capital gains on long-term holdings. Last verified: 2026-05-27.

US: what changed in 2026

1099-DA gross-proceeds reporting started tax year 2025; cost-basis reporting on covered assets becomes mandatory for 2026 transactions. Wallet-by-wallet basis tracking is now required. Wash-sale rule still does not apply to crypto. Last verified: 2026-05-27.

1099-DA reporting timeline:

• Tax year 2025 (filed by April 2026): US CEXs report gross proceeds to the IRS. Cost basis is optional for brokers this cycle. Self-custody transfers show as non-covered with unknown basis.
• Tax year 2026 (filed by April 2027): Cost-basis reporting becomes mandatory on covered assets — those acquired on or after January 1, 2026 and held continuously at the same broker. Inbound transfers from self-custody wallets remain non-covered; the IRS defaults to $0 basis unless you supply records.
• Wallet-by-wallet basis tracking (Rev. Proc. 2024-28): From 2025 onward, the IRS requires basis to be tracked per wallet or account — the old universal (across-all-wallets) method is no longer allowed. Taxpayers who held crypto prior to 2025 had until January 1, 2025 to use the Rev. Proc. 2024-28 safe harbor to allocate legacy basis to specific wallets. That window is closed; if you missed it, work with a CPA to document your allocation.
• DeFi reporting rule rescinded: President Trump signed the Congressional Review Act resolution on April 10, 2025, nullifying the Biden-era DeFi broker rule (TD 10021). Pure DeFi front-ends — smart-contract routers, AMMs — have no 1099-DA obligation. The CRA bars Treasury from issuing a substantially similar rule without new legislation. Your DeFi tax liability is unchanged; only the automatic reporting requirement on the protocol side was removed.

Wash-sale rule still does not apply to crypto as of May 2026. The proposed extension of §1091 to digital assets has appeared in multiple draft bills since 2021 and has not been enacted. You can sell at a loss and immediately rebuy the same token — fully legal for crypto, a 30-day disallowance for stocks. Bipartisan support for closing this gap continues to grow; treat this as a strategy to use while it lasts.

FIT21 (Financial Innovation and Technology for the 21st Century Act, 2024) clarified that mature decentralized coins — BTC, ETH, and others meeting specific decentralization tests — are CFTC commodities, not SEC securities. This is regulatory, not tax: capital gains treatment is unchanged.

Common crypto tax scenarios (US)

Buy-and-hold = no tax. Selling, trading crypto-for-crypto, spending, staking rewards, airdrops, and NFT mints are taxable. Bridges are usually not taxable; LP deposits are debated. Last verified: 2026-05-27.

Buy and hold (no sale)

Tax: none. Holding crypto is not a taxable event, regardless of unrealized appreciation. Mark-to-market only applies if you elect §475 trader status — a high bar requiring consistent, frequent trading as a primary business activity.

Sell BTC for USD

Tax: capital gain = (sale price minus cost basis). Short-term if held under 1 year (taxed as ordinary income, 10-37%); long-term if over 1 year (0/15/20% plus 3.8% NIIT for high earners). Cost basis must be tracked per wallet per the IRS final regs effective 2025.

Trade BTC for ETH

Tax: capital gain on the BTC. The IRS treats this as a sale of BTC at fair market value (FMV), followed by a purchase of ETH at FMV. No like-kind treatment since the 2017 Tax Cuts and Jobs Act limited §1031 to real property.

Receive ETH from staking

Tax: ordinary income at FMV on receipt. Revenue Ruling 2023-14 confirmed: staking rewards are income when the taxpayer gains dominion and control over them — typically when the rewards become available to sell or transfer. Cost basis of received ETH = FMV at receipt. When you later sell, capital gain or loss runs from that basis.

Receive an airdrop

Tax: ordinary income at FMV when you control the tokens (Revenue Ruling 2019-24 — IRS calls this "dominion"). If you never claim, no tax. Airdrops claimed via KYC-linked addresses are visible to the IRS; Coinbase confirmed it turned over attestation data for ARB and OP airdrops.

Bridge ETH from mainnet to Base

Tax: generally not taxable. Most accountants treat 1:1 bridges as non-taxable transfers (same asset, different chain). Bridges that cross asset types (for example, USDC.e to native USDC) may be taxable as disposals. The IRS has not issued specific guidance; treat consistently and document your position.

LP deposit on Uniswap

Tax: complex. Conservative view: depositing two tokens into an LP is a sale of one token for an LP token — a taxable disposal. Aggressive view: it is a wrapper, not a sale. Most US accountants take the conservative view. Consult your CPA before sizing into Uniswap V3 concentrated positions that require frequent rebalancing.

NFT mint

Tax: paying ETH for an NFT = sale of ETH (taxable). NFT cost basis = ETH FMV at purchase plus gas paid in ETH (the gas ETH spent is itself a disposal of ETH).

NFT royalty income (creator)

Tax: ordinary income at receipt. If you operate as a sole proprietor, file Schedule C; you can deduct expenses (gas, marketplace fees, software subscriptions).

DeFi tracking — the practical problem

Active DeFi users generate 1,000-10,000 tax events per year. Koinly (Koinly is a crypto tax software with strong DeFi auto-categorization across 12,000+ tokens) is the de facto standard; CoinTracker for CEX-heavy users. Last verified: 2026-05-27.

Every swap on a DEX, every LP add or remove, every yield claim, every airdrop claim, every bridge that wraps assets creates a separate tax event. Manual tracking is impossible past a few hundred transactions, and the tooling is the difference between a clean $500 filing and a $5,000 reconciliation with the IRS.

Tools (May 2026):

For DeFi-heavy users: Koinly is the de facto standard. For Coinbase-primary users: CoinTracker because of native broker import and TurboTax integration.

Workflow:

1. Connect every wallet (read-only via public address — never paste seed phrases).
2. Connect every CEX (API key with read-only permissions, or CSV import).
3. Review auto-categorization — DeFi transactions often need manual review (LP deposits, exotic protocols, NFT mints).
4. Export Form 8949 / cost-basis report per wallet (required under IRS wallet-by-wallet rules).
5. Hand to CPA or import into TurboTax / TaxAct.

Tax-loss harvesting (US)

Sell underwater positions in December and rebuy immediately — the wash-sale rule does not apply to crypto in 2026. Up to $3,000 of net losses can offset ordinary income annually. Last verified: 2026-05-27.

Sell crypto positions sitting at a loss to offset gains. Wash-sale rule does not apply to crypto as of May 2026, so you can immediately rebuy the same asset. This is the most underused legal optimization for active US crypto filers.

Example:

• You hold 10 ETH bought at $4,000 each ($40,000 basis), currently worth $2,500 each ($25,000 FMV).
• December 28: sell all 10 ETH for $25,000 → realize $15,000 long-term capital loss.
• December 28 (same day): rebuy 10 ETH at $25,000. New basis = $25,000.
• Use the $15,000 loss to offset $15,000 of other capital gains. If you have no gains, $3,000 offsets ordinary income that year; remaining $12,000 carries forward indefinitely.

Do this annually in December for every losing position. The execution risk is purely opportunity-cost: between sell and rebuy, you are out of the position for seconds on a CEX or low minutes on a DEX.

High-leverage tax strategies

Five legal moves: hold over 1 year for long-term rates, fund a Roth crypto IRA, donate appreciated crypto, relocate to Puerto Rico under Act 60 (Puerto Rico Act 60 grants 0% capital gains on PR-sourced income for bona fide residents who apply before Jan 1, 2027), or move tax residency to Singapore/UAE/Portugal/Germany. Last verified: 2026-05-27.

1. Hold over 1 year

Reduces US tax from up to 37% (short-term, ordinary income) to 0/15/20% (long-term capital gains). For a six-figure realized gain, this is a $50,000-100,000 tax delta.

2. Roth crypto IRA

Open a Bitcoin IRA, Alto, iTrustCapital, or Unchained IRA account. Buy BTC/ETH inside. Sales inside the Roth are tax-free; qualified withdrawals at retirement are tax-free. 2026 contribution cap: $7,500 ($8,600 if age 50 or older), per the IRS announcement for tax year 2026. For high earners over the direct Roth income limit, the backdoor Roth plus crypto custodian combination still works.

3. Donate appreciated crypto

US donors who give appreciated crypto held over 1 year to a 501(c)(3) get a charitable deduction at FMV and skip capital gains entirely. Effective tax saving: combined ordinary deduction (up to 30% of AGI for appreciated property) plus avoided capital gains. The Giving Block and Fidelity Charitable both accept crypto directly. For a $100,000 appreciated BTC position, the combined tax saving can exceed $30,000-40,000 compared with selling first and donating cash.

4. Puerto Rico Act 60

Critical 2026 update: Puerto Rico extended Act 60 through 2055 but introduced a tiered rate structure. Applicants who obtain their decree on or before December 31, 2026 lock in 0% capital gains tax on PR-sourced gains for the term of their decree. Applicants submitting after December 31, 2026 pay a 4% rate on capital gains and investment income — still far better than the US rate (up to 37% short-term, 20% long-term), but the 0% window closes at year-end 2026.

Residency requirements remain stringent: 183+ days per year in Puerto Rico, primary home in Puerto Rico, closer connection to Puerto Rico than to the mainland, and an annual charitable donation to a Puerto Rico nonprofit (amount set per decree). The IRS audits these aggressively — fake residency gets unwound and back-taxed with penalties. The 0% rate also applies only to gains on assets acquired after establishing residency; pre-move positions are still subject to US tax.

5. Move countries

Singapore (no individual capital gains), UAE (no personal income or capital gains — Dubai residency is the common path), Portugal (0% on crypto held over 365 days for non-professional traders; 28% on short-term gains; staking and lending income taxed at 28% regardless of holding period), Germany (0% capital gains after 1 year under §23 EStG; staking does not extend the holding period on originally purchased tokens). Requires actual tax residency. Exit taxes in Germany (Wegzugsbesteuerung) and France (exit tax on unrealized gains above €800,000) can claw back gains on departure.

Best tax setup by use case

Pick by profile: Puerto Rico Act 60 before year-end for high-net-worth US citizens, Singapore/UAE for non-US, Koinly + CPA for DeFi-heavy users, CoinTracker for CEX-only, December tax-loss harvesting for everyone. Last verified: 2026-05-27.

• Best country for 0% long-term crypto gains (US citizen, deadline) — Puerto Rico Act 60 (real residency, 183+ days, annual donation, apply before December 31, 2026 to lock in 0%).
• Best country for 0% crypto gains (non-US) — Singapore, UAE, Portugal (post-365 days), Germany (post-1 year).
• Best tax tool for heavy DeFi — Koinly plus a crypto-savvy CPA (roughly $1,000-3,000/year combined).
• Best tax tool for CEX-primary investors — CoinTracker or Coinbase's built-in tax export.
• Best tax-loss harvesting window (US) — December, before December 31 — sell underwater positions, rebuy immediately (no wash-sale rule yet).
• Best tax strategy for charitable giving — Donate appreciated crypto held over 1 year to a 501(c)(3) — FMV deduction plus skip capital gains.
• Best tax-advantaged crypto account (US) — Roth Bitcoin IRA via iTrustCapital, Alto, or Unchained. 2026 limit: $7,500 ($8,600 if 50 or older).
• Best tax move when you have unrealized gains — Hold over 1 year to drop from ordinary income (up to 37%) to long-term capital gains (0/15/20%).
• Best tax move for short-term traders — Run business as an LLC plus S-corp election for trader-tax-status if you qualify (consult CPA).
• Worst tax mistake — Ignoring DeFi transactions. The IRS has airdrop attestation data from US CEXs; the agency matches outbound CEX transfers against returns with no self-reported DeFi activity.

Mistakes that get audited

Top audit triggers: ignoring DeFi, treating crypto-for-crypto as non-taxable, omitting airdrops, missing wallet-by-wallet basis documentation, and hiding KYC-linked wallets. Last verified: 2026-05-27.

• Reporting only CEX gains and ignoring DeFi. Your Coinbase 1099-DA shows you transferred 50 ETH off-platform. If your return shows no DeFi activity, the IRS will ask why. The agency pulled audit notices in 2024 for filers who showed $100,000-plus outbound CEX transfers with no corresponding self-reported DeFi activity.
• Treating crypto-to-crypto as non-taxable. Firmly wrong since the Tax Cuts and Jobs Act limited §1031 to real property in 2017. The IRS Chief Counsel Memorandum CCA 202114020 closed the door formally in 2021.
• Not reporting airdrops. The IRS obtained CEX airdrop attestation data starting in 2024-2025 (Coinbase confirmed turnover for ARB and OP airdrops). If you claimed an airdrop via a KYC-linked address, the IRS has the FMV and timing.
• Failing to track basis per wallet under the new wallet-by-wallet rules. From 2025 onward, basis must be tracked per account. Using a single blended basis across all wallets is no longer compliant; it typically inflates gains or creates mismatches with 1099-DA.
• Assuming unknown-basis 1099-DA entries mean no tax. Non-covered assets show basis as unknown on 1099-DA. The IRS defaults to $0 cost basis for non-covered assets without documentation. If you transferred in BTC bought at $10,000 and sell at $50,000 with no basis records, you will be assessed on the full $50,000 gain.
• Hiding wallet addresses you've publicly linked to your name. ENS names, Twitter handles on Etherscan, public donation addresses, leaked KYC data — Chainalysis Reactor links these aggressively, and the IRS Criminal Investigation unit licenses Chainalysis. The 2023 Roger Ver indictment was built almost entirely on chain analysis.

What to actually do this filing season

Six steps: pull data into Koinly, reconcile DeFi manually, run December tax-loss harvest, lock in per-wallet cost-basis method, cross-check against 1099-DA, file with a crypto CPA if DeFi-heavy.

1. Aggregate every wallet and exchange into one tool. Connect each self-custody wallet by public address (read-only). Connect each CEX by API (read-only) or CSV export. Koinly or CoinTracker, your choice. Every wallet must be in the same tool or you cannot reconcile.
2. Reconcile DeFi manually. Scroll through "Needs Review" transactions. Bridges → non-taxable transfers in most cases. LP deposits → flag for CPA review. Airdrop claims → income at FMV on claim date. Non-covered assets → document your original purchase records.
3. Run tax-loss harvesting in December. Sort positions by unrealized P&L. Sell anything red. Rebuy immediately. Document the trades with timestamps.
4. Lock in your cost-basis method per wallet in writing. FIFO, LIFO, or HIFO (highest-in-first-out for maximum losses on each sale) — per account, per the IRS wallet-by-wallet rules. Save the election as a PDF with your records. Do not switch mid-year.
5. Cross-check against your 1099-DA forms. When Coinbase or Kraken sends your 1099-DA in January 2026 (for tax year 2025), open your Koinly report side-by-side. The gross proceeds line must match. Non-covered entries with unknown basis require your own documentation. Find discrepancies before filing — CP2000 notices are slow, expensive, and stressful.
6. File via TurboTax, TaxAct, or a crypto CPA. Import the Form 8949 export. For DeFi-heavy filers: hand the reconciled report to a crypto-savvy CPA (Gordon Law, CryptoTaxPrep, JFDI Accountants are well-known options). Budget $1,000-3,000 combined for tool plus advisor for a typical active DeFi user.

Looking ahead

Four signals to track over the next 12 months:

• DAC8/CARF goes live for EU and UK. Starting January 1, 2026, crypto asset service providers operating in the EU and UK must collect and report user transaction data to national tax authorities under DAC8 and the CARF framework. The first data exchange to national authorities occurs in 2027 (covering 2026 activity). If you have accounts on any EU-licensed or UK-licensed exchange — Bitstamp, Bitpanda, Kraken EU, Coinbase EU — that exchange is now reporting your activity.
• Wash-sale rule extension. Multiple draft bills extend §1091 to digital assets. Bipartisan support is growing because closing the crypto wash-sale gap is easy to score as a revenue raiser. Plausible enactment window: 2027 tax year. Use the strategy while it is still available.
• IRS Operation Hidden Treasure expansion. The IRS Criminal Investigation unit's crypto-focused enforcement program continues expanding hires through 2026. Expect more criminal cases targeting taxpayers with large historical on-chain balances, public addresses, and no filing history.
• Japan's 20% flat tax reform. The LDP-backed plan to replace Japan's up-to-55% miscellaneous income rate with a 20% flat rate on specified crypto assets targets a January 1, 2028 effective date. The reform requires amendments to the Financial Instruments and Exchange Act. Not yet enacted; Japan filers are still subject to the existing miscellaneous income treatment in 2026.

Verdict

Heavy DeFi: Koinly + crypto CPA ($1k-3k/yr). Casual: CoinTracker. High net worth and US citizen: Puerto Rico Act 60 before December 31, 2026. International: Singapore or UAE. Everyone: harvest losses every December. Last verified: 2026-05-27.

• Heavy DeFi user: Koinly plus a crypto-savvy CPA. Budget $1,000-3,000/year combined.
• Casual investor: CoinTracker or Coinbase's tax export tools.
• High net worth US citizen: Puerto Rico Act 60 — the 0% rate window closes for new applicants at December 31, 2026. Real money saved, real residency required.
• Non-US high net worth: Singapore, UAE, Portugal (over 1 year), or Germany (over 1 year).
• Anyone: Track losses and harvest them every December before the wash-sale exemption disappears.

This guide is general information, not tax advice. Crypto tax law changes faster than most other areas — several of the rules in this guide changed in the last 12 months alone. Always consult a CPA familiar with crypto in your jurisdiction before sizing any of these strategies.

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