Most cryptocurrency customers still do not understand how cryptocurrencies are taxed, wrongly believing that elementary transfers trigger tax events.
Well intended crypto-tax confusion
Although most cryptocurrency investors intend to comply with tax laws, there is much confusion among traders regarding cost basis, taxable events and changing IRS regulations. As Coinbase’s modern 2026 Crypto Tax Readiness Report shows. The survey was conducted between September and October 2025 among a population of 3,000 cryptocurrency users in the US.
Regulators are stepping up enforcement and data collection, while retail users are left confused about what actually is a taxable event and how to track it across wallets, CEXs and DeFi. Regulations are changing too quickly for users to keep track – 61% of users surveyed said they were unaware of specific tax rules required for reporting for the 2025 tax year.
Under current U.S. regulations, most cryptocurrencies are treated as property, which means that selling, trading, exchanging for another coin, or even paying fees can result in capital gains or losses that must be reported. However, only 49% of cryptocurrency users correctly understand that a tax event is triggered when the cryptocurrency is sold, and 22% of them were mistakenly convinced that a elementary transfer to other accounts is taxable.
The graphic shows users knowledge regarding taxable crypto taxations. Source: Coinbase’s 2026 Crypto Tax Readiness Report.
“The story this data tells is full of uncertainty,” said Lawrence Zlatkin, vice president of tax at Coinbase. “Users are having difficulty navigating the complexities of cryptocurrency taxation.”
Brokers like Coinbase will now send standard forms (1099-DA) reporting inflows, but they can’t see every part of the DeFi or DEX in the strategy, leaving many users with forms that show gigantic gross numbers and have no context unless they employ specialized tax software. On average, users employ 2.5 platforms or wallets, and 83% employ self-care, creating a cost reconciliation problem that most still haven’t figured out.
The graphic shows users relationship with cost-basis. Source: Coinbase’s 2026 Crypto Tax Readiness Report.
What does this mean for traders
If regulators double down on enforcement while the average user remains lost, the result could be overpayment, underreporting of risk, or simply less online activity as people retreat to the “safe” behavior of buy-and-hold, reshaping liquidity and volatility.
Tax ignorance can be extremely costly. Those who ignore the modern reporting system risk surprise bills, audits, or having to later close out positions at bad prices. Experienced investors should avoid this by starting to treat tax resistance as part of strategy design, using tools like CoinTracker to model after-tax returns rather than just PnL on a screen.
At the moment of writing, BTC trades for the highs $67k. Source: BTCUSD on Tradingview
Cover image from Perplexity, BTCUSD chart from Tradingview
