The majority of U.S. crypto users still misunderstand how crypto is taxed, with many wrongly believing simple transfers trigger taxable events.
Well-intended crypto-tax confusion
Although most crypto investors want to comply, confusion around cost basis, taxable events and changing IRS rules remains widespread, according to Coinbase’s 2026 Crypto Tax Readiness Report. The survey of 3,000 U.S. crypto users was conducted between September and October 2025.
Regulators are increasing enforcement and data collection while retail users struggle to identify what counts as a taxable event and how to track transactions across wallets, centralized exchanges and DeFi. The rules have changed rapidly: 61% of respondents said they were unaware of specific 2025 reporting rules.
Under current U.S. tax law, most crypto is treated as property. That means selling, trading, swapping into another token, or paying fees can create capital gains or losses that must be reported. Yet only 49% of users correctly recognized that selling crypto triggers a taxable event, and 22% mistakenly believed simple transfers between wallets are taxable.
“The story this data tells is one of uncertainty,” said Lawrence Zlatkin, Vice President of Tax at Coinbase. Brokers like Coinbase will issue standardized forms (1099-DA) reporting proceeds, but they may not capture every DeFi or DEX transaction, leaving users with large gross figures and little context unless they use dedicated tax software.
On average, users manage 2.5 platforms or wallets, and 83% rely on self-custody. That mix makes cost-basis reconciliation difficult for most users.
What this means for traders
If enforcement ramps up while users remain confused, outcomes could include overpayment, underreporting risk, or reduced on-chain activity as some shift to simple buy-and-hold strategies—changes that would affect liquidity and volatility.
Ignoring the reporting regime can be costly: taxpayers risk surprise bills, audits, or having to unwind positions at unfavorable prices later. Traders and investors should treat tax consequences as part of strategy design and consider tools like CoinTracker to model after-tax returns rather than focusing only on on-screen PnL.
At time of writing, BTC trades near the mid-$60k range. Source: Tradingview (BTCUSD).
Cover image from Perplexity; BTCUSD chart from Tradingview.
