What to know about the new IRS digital asset rules

Once considered niche, digital assets are going mainstream, with the cryptocurrency asset class alone representing $3.2 trillion in market capitalization, according to Invesco.

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The expansion of cryptocurrency, stablecoins and tokenized assets — fueled by updated regulations and interest from younger investors — comes just as the IRS is rewriting its reporting rules for digital assets, creating a perfect storm of opportunity and complexity for financial professionals. 

Advisors who stay proactive and informed are better positioned to navigate these evolving requirements, enhance tax-efficient strategies and build deeper client trust — ultimately guiding clients through this rapidly changing investment landscape with confidence.

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The IRS tightens reporting rules for digital assets

Digital assets are classified as property, meaning most crypto activity — sales, trades, mining, staking and airdrops — trigger taxable events. While this has been true for more than a decade, the real change is in reporting obligations. 

Brokers must now report digital asset activity using Form 1099-DA, bringing crypto reporting closer to traditional securities. For tax year 2025, brokers will use this new form to report gross proceeds. For tax years 2026 and beyond, brokers will report both cost basis and gross proceeds on the 1099-DA.

Because many 2025 statements won’t include cost basis, high net worth investors using multiple platforms or wallets must maintain precise records. Decentralized exchanges and noncustodial brokers remain outside reporting rules for now, which adds further complexity.

Additionally, cost basis must now be tracked per wallet or account beginning with 2025 activity, eliminating universal pooling and making the choice between first‑in, first‑out (FIFO) and specific identification far more consequential. FIFO assumes the earliest purchased assets are sold first, which can increase taxable gains, while specific ID lets investors choose which lots to sell, offering more control over tax outcomes.

Here is a four-step process for advisors leading clients through new crypto-tax guidelines.

READ MORE: 3 regulatory shifts that change the crypto game for RIAs

Create a tax-forward investment framework

The advisor should standardize how they capture digital-asset data — including wallet addresses, exchanges and cost-basis methods — to ensure no taxable events are missed. 

Use a centralized intake process during onboarding or annual reviews to gather all platforms, wallets, cost-basis elections and transaction histories, then sync this information into CRM or tax-planning tools to reduce reporting gaps and support proactive planning year-round.

Prioritize technology-enabled recordkeeping

I recommend platforms that consolidate and reconcile digital-asset activity, especially since many 2025 1099-DA forms will lack cost basis.

Keep a pulse on evolving rules

IRS guidance on digital asset and decentralized-broker reporting continues to evolve. Monitor updates closely via the agency’s Digital Assets page or its online bulletins. 

Communicate early and often with clients

Proactively brief clients on new reporting rules, cost-basis requirements and planning implications across digital assets. 

Digital assets are expanding at lightning speed, backed by trillions in new capital and strong long-term forecasts. But with growth comes complexity. Advisors who master Form 1099-DA, understand the evolving 2026 tax rules and guide clients proactively will deliver a stronger, more strategic experience in a fast-growing corner of financial services.