U.S. crypto tax reporting arrives; Here’s how much you’ll pay 
Cryptocurrency Jul 1, 2024 Share
The Treasury Department announced on June 28 that starting in 2026, most cryptocurrency brokers will be required to disclose user transaction proceeds to the Internal Revenue Service (IRS).
This new reporting requirement aims to curb tax evasion within the cryptocurrency market. Specifically, crypto exchanges and payment processors, such as Coinbase (NASDAQ: COIN), will need to report user sales and trades to the IRS.
The rule does not introduce a new tax but reinforces existing tax obligations for cryptocurrency investors, similar to those of traditional financial services.
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New tax format is aimed at increased crypto transparency
A newly designed rule seeks to prevent tax evasion on crypto platforms by making transactions traceable through public addresses.
As part of this initiative, crypto traders will receive straightforward tax reporting forms each year, similar to those provided to investors in stocks and other traditional assets.
“Investors in digital assets and the IRS will have better access to the documentation they need to easily file and review tax returns,” said Aviva Aron-Dine, Treasury’s acting assistant secretary for tax policy. “These final regulations will help taxpayers more easily pay taxes owed under current law while reducing tax evasion by wealthy investors.”
Historically, crypto investors have had to rely on expensive and often inaccurate service providers to estimate their tax liabilities.
The new rule simplifies this process, ensuring crypto traders can accurately report their crypto taxes without additional costs or complexities.
There will be exceptions under the new crypto tax format
The new reporting requirements have exceptions, notably for decentralized exchanges that facilitate peer-to-peer trading without intermediaries. Under the current rule, these platforms will not be required to report user transactions.
However, the Treasury Department has indicated that it will consider additional reporting requirements for decentralized crypto exchanges later this year.
This move suggests a potential future expansion of the reporting mandate to include these decentralized platforms, ensuring comprehensive tax compliance across the entire cryptocurrency market.
President Biden’s latest budget proposal has sparked concern among investors due to a significant increase in the capital gains tax. The plan proposes raising the rate to a maximum of 44.6%, the highest since the tax’s inception in 1913.
This substantial hike contrasts sharply with historical rates, such as the original maximum of 7%, the 12.5% cap under the 1921 Revenue Act, and the 20% limit set during former President Trump’s term. The proposal’s potential impact on the stock market has made it a highly controversial topic.
