Most crypto customers do not understand how crypto is taxed, mistakenly believing that simple transfers create tax events.
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Well-intentioned crypto-tax confusion
Although the majority of crypto investors aim to comply with the tax law, great confusion reigns among traders regarding the cost basis, taxable events and the changing rules of the IRS, Coinbase’s new 2026 tax readiness report shows. The survey was conducted between September and October 2025, with a population of 3.000 US crypto users.
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Regulators are increasing enforcement and data collection while retail users remain confused about what is actually a taxable event and how to track it across wallets, CEXs and DeFi. The law is evolving too quickly for users to keep track of, as 61% of users surveyed reported that they were unaware of certain tax rules issued for the reporting of the 2025 tax year.
Under current US laws, most crypto is considered an asset, meaning that selling, trading, exchanging for another coin, or even paying fees may result in significant gains or losses that must be reported. However, only 49% of crypto users understand correctly that a tax event is triggered whenever crypto is sold, while 22% of them fall under the misconception that simple transfers to other accounts are taxed.
The graphic shows users knowledge regarding taxable crypto taxations. Source: Coinbase’s 2026 Crypto Tax Readiness Report.
“The story this data speaks about is one of uncertainty”, Lawrence Zlatkin, Vice President of Taxes at Coinbase said, “Users are struggling to navigate crypto tax issues”.
Merchants such as Coinbase will now send standard forms (1099-DA continuous income) for reporting, but they cannot see all the DeFi or DEX legs in the strategy, leaving many users with forms that show large statistics and no context unless they use special tax software. On average, users throw away 2.5 platforms or wallets, and 83% rely on self-defense, which creates a cost base reconciliation headache that most don’t realize.
The graphic shows users relationship with cost-basis. Source: Coinbase’s 2026 Crypto Tax Readiness Report.
What This Means for Traders
If regulators double down on enforcement while the average user remains at a loss, the result could be overpayments, underreporting risks, or activity down the chain as people revert to “safer” buying and holding behavior, all of which re-create deficits and instability.
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Tax ignorance can be very costly. Those who continue to ignore the new reporting regime are at risk of surprise debts, audits, or being forced to write down positions in negative amounts later. Smart traders should avoid this by starting to treat tax deductions as part of strategy design, using tools like CoinTracker to model after-tax returns instead of just PnL on screen.
At the moment of writing, BTC trades for the highs $67k. Source: BTCUSD on Tradingview
Cover image from Perplexity, BTCUSD chart from Tradingview
