The majority of crypto customers still donโt understand how crypto is taxed, mistakenly believing simple transfers trigger tax events.
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Well intended crypto-tax confusion
Although most crypto investors intend to comply with tax law, major confusion reigns amongst traders about cost basis, taxable events and evolving IRS regulations, Coinbaseโs new 2026 Crypto Tax Readiness Report shows. The survey was conducted between September and October 2025, with a population of 3.000 U.S. crypto users.
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Regulators are ramping up 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 legislation evolves way too fast for users to keep track, with 61% of the surveyed users reporting they were unaware of specific tax rules slayed for 2025 tax year reporting.
Under current U.S. rules, most crypto is treated as property, which means selling, trading, swapping into another coin, or even paying fees can trigger capital gains or losses that must be reported. However, only 49% of crypto users correctly understand that a tax event is triggered anytime crypto is sold, with 22% of them falling under the misconception that a simple transfer to other accounts is taxable.
The graphic shows users knowledge regarding taxable crypto taxations. Source: Coinbaseโs 2026 Crypto Tax Readiness Report.
โThe story this data tells is one of uncertaintyโ, Lawrence Zlatkin, Vice President of Tax at Coinbase said, โUsers are struggling to navigate the complexities of crypto taxationโ.
Brokers like Coinbase will now send standardized forms (1099โDA) reporting proceeds, but they cannot see every DeFi or DEX leg in a strategy, leaving many users with forms that show large gross figures and no context unless they use specialized tax software. On average, users juggle 2.5 platforms or wallets, and 83% rely on selfโcustody, which creates a costโbasis reconciliation headache that most still havenโt figured out.
The graphic shows users relationship with cost-basis. Source: Coinbaseโs 2026 Crypto Tax Readiness Report.
What This Means For Traders
If regulators double down on enforcement while the average user remains lost, the result could be overpayment, underโreporting risk, or simply less onโchain activity as people retreat to โsafeโ buyโandโhold behavior, all of which reshape liquidity and volatility.
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Tax ignorance can be extremely costly. Those who keep ignoring the new reporting regime risk surprise bills, audits, or being forced to unwind positions at bad prices later. Savvy traders should avoid this by starting to treat tax drag as part of strategy design, using tools like CoinTracker to model afterโtax returns instead of just PnL onโscreen.
At the moment of writing, BTC trades for the highs $67k. Source: BTCUSD on Tradingview
Cover image from Perplexity, BTCUSD chart from Tradingview
