New form, same rules? Explaining crypto taxes on 1099-DA income

If you received a Form 1099-DA, you may be trying to understand how the amounts reported on that form translate into actual taxes owed. Form 1099-DA is a new IRS information return used to report sales and exchanges of digital assets that occur through U.S. custodial platforms.

For transactions reported on Form 1099-DA for tax year 2025, the amounts shown generally represent gross proceeds from crypto sales rather than taxable gains and losses. Because those transactions are treated as noncovered for reporting purposes, Form 1099-DA typically does not indicate cost basis, holding period, or whether a gain is short-term or long-term. As a result, the figures reported on the form are not the complete amounts on which tax is ultimately calculated.

To determine taxes on 1099-DA income, taxpayers start with the amounts reported on the form and may use their own books and records to complete any missing cost basis information. Any resulting gains or losses are then treated as short-term or long-term capital gains depending on how long the asset was held. Understanding how 1099-DA reporting works helps taxpayers see what information the IRS receives and how reported amounts ultimately affect their crypto tax liability.

What does the 1099-DA represent?: Form 1099-DA explained

For the 2025 tax year, Form 1099-DA reports gross proceeds and may not include acquisition information. This is because all digital asset sales reported in 2025 are treated as noncovered transactions for IRS reporting purposes. Without cost basis and related acquisition information, proceeds alone are not sufficient to determine taxable gains or losses.

In some cases, taxpayers may see acquisition information, such as cost basis and gain or loss, on the statement they receive from an exchange if the exchange has complete transaction history for the asset. This typically occurs when an asset was acquired on the platform, held continuously in custody, and disposed of on the same platform without being transferred. However, this information is not required to be reported to the IRS for noncovered assets and is often unavailable when assets have been transferred between platforms or wallets.

While Form 1099-DA generally reports proceeds only for 2025, taxpayers may rely on their own books and records to determine cost basis and lot selection. Under IRS Notice 2025-07, taxpayers are permitted to make an adequate identification of digital assets using their books and records for 2025 transactions. In practice, this involves using external records, such as transaction histories or crypto tax software, together with the gross proceeds reported on Form 1099-DA to calculate taxable gains or losses.

Starting in 2026, digital assets acquired on or after January 1, 2026 are treated as covered assets if they are acquired and disposed of on the same custodial platform without being transferred. In those circumstances, brokers are required to report cost basis information in addition to proceeds. However, if assets are transferred between platforms, cost basis information is generally no longer required to be reported, and Form 1099-DA may again reflect proceeds only.

How is crypto on a 1099-DA taxed?

Crypto dispositions reported on Form 1099-DA are generally subject to crypto capital gains tax and are taxed under the same IRS rules applicable to digital assets. 

When a cryptocurrency is sold or exchanged, the transaction is generally treated as a capital asset disposition. Taxable gain or loss is calculated by subtracting the asset’s cost basis from the proceeds reported on the Form 1099-DA. If the result is positive, the taxpayer has a capital gain. If the result is negative, the taxpayer has a capital loss.

The amount of tax owed depends on how long the asset was held before disposal. Digital assets held for more than one year before being sold or exchanged qualify for long-term capital gains tax rates (0%, 15%, or 20%, depending on taxable income). Assets held for one year or less are subject to short-term capital gains tax, which is taxed at ordinary income rates (10% - 37%).

Capital losses from crypto transactions can be used to offset capital gains from other crypto or non-crypto assets. If total capital losses exceed total capital gains for the year, up to $3,000 of net capital losses may be deducted against other income, with any remaining losses carried forward to future tax years. 

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How do I pay taxes using a 1099-DA?

Taxpayers should use the information reported on Form 1099-DA, together with their own records, to report transactions on Form 8949.

Once reported on Form 8949, crypto capital gains and losses are combined with the taxpayer’s other capital transactions to determine a net capital gain or loss for the year. A net capital gain is then added to other sources of income, such as wages, business income, and investment income, to arrive at the total income subject to tax. A net capital loss, on the other hand, can reduce that total taxable income, subject to annual deduction limits, with any excess losses carried forward to future years. This combined amount is then used to calculate the taxpayer’s overall tax liability, which is generally paid through wage withholding, estimated tax payments, or a balance due paid by the filing deadline.

How to prepare for the future of 1099-DA reporting

Form 1099-DA reporting for digital assets will continue to evolve, but it is not intended to replace a taxpayer’s own records. Even as reporting expands in future years, taxpayers remain responsible for maintaining sufficient documentation to substantiate acquisition information for their crypto assets. Preparing for ongoing 1099-DA reporting primarily means ensuring that your records can be consistently matched to the sales reported on these forms.

To stay prepared for future reporting requirements, consider the following best practices:

• Keep a single crypto transaction log: Accurate tax reporting depends on having a complete record of crypto activity across all platforms. Maintaining a consolidated transaction log helps ensure that proceeds reported on a 1099-DA can be matched to acquisition details and other relevant information. Many taxpayers use a software solution like CoinTracker to aggregate data from exchange APIs, self-custodial wallets, and smart contracts into a single, consistent record.
• Note acquisition dates for every digital asset: Acquisition date and cost are essential for determining cost basis and whether a disposal results in a short-term or long-term gain or loss. Keeping this information organized supports accurate reporting when proceeds are reported without basis on a Form 1099-DA.
• Record fair market value for crypto income: When digital assets are received as income, rewards, or airdrops, the fair market value at the time of receipt is a critical data point. That value generally establishes the amount included in income and becomes the cost basis for determining gain or loss on a future disposition.
• Double-check know-your-customer (KYC) policies: Form 1099-DA information is furnished to both taxpayers and the IRS. Ensuring that account and identification details, such as name, address, and Taxpayer Identification Number (TIN), are accurate on custodial platforms helps reduce the risk of reporting mismatches, IRS notices, or delays during tax filing.

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Disclaimer: This post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.

FAQ

Where do I report 1099-DA crypto sales?

Crypto sales shown on a Form 1099-DA are reported on Form 8949. Taxpayers should report the sales using the information provided and verify their cost basis against their own records to calculate gains or losses.

What forms do I file for 1099-DA?

Taxpayers use the information shown on Form 1099-DA to report their crypto transactions on Form 8949, which is included as part of their individual income tax return. Form 1099-DA is filed by brokers with the IRS and provided to taxpayers for informational purposes.

What’s the tax rate for crypto gains on 1099-DA?

Crypto transactions reported on a Form 1099-DA are taxed based on the resulting gain or loss. Gains are generally taxed as short-term (10% - 37%) or long-term capital gains (0%, 15%, or 20%), depending on how long the asset was held before disposal. The applicable tax rate depends on the taxpayer’s holding period and overall tax situation.