IRS Postpones Implementation of Crypto Tax Rules to 2026

The Internal Revenue Service (IRS) postpones the implementation of the crypto tax rules to January 1, 2026, allowing exchanges more time to adapt to the requirements. 

The decision indicates that the tax agency understands the complexities of the new crypto tax rules. It is worth mentioning that the IRS had initially planned to implement the crypto tax reporting rule this year. However, it extended the implementation to January 1, 2026, almost a year from now. 

The extension comes days after the Texas Blockchain Council and Blockchain Association sued the IRS over its plans to tax crypto gains. These organizations contended that the tax regulator overstepped its constitutional bounds by expanding its requirements to the crypto market. 

Features of the New Tax Rules 

Under the tax rules, crypto exchanges must provide the cost basis of digital assets sold on their platforms. The trading platforms are expected to calculate users’ gains and losses incurred through the sale of digital assets. 

Notably, the default accounting method for this calculation is FIFO (First In, First Out). This method assumes that the first units of crypto purchased are the first to be sold, potentially leading to a surge in taxable gains. 

Expectedly, concerns about the FIFO method have been raised, with taxpayers indicating it could result in inflated tax bills. Cointracker’s head of tax, Shehan Chandrasekera, shared this sentiment among several crypto stakeholders.

Cause and Benefit of the Extension 

This postponement was driven by several factors, particularly inadequate preparation on the path of exchanges, the need for better regulatory clarity, and technological complexity in terms of implementation. 

Notably, the postponement offers enormous benefits for both investors and brokers. Brokers now have sufficient time to develop the necessary systems to track the cost basis of digital assets sold on their platforms. 

On the other hand, investors can choose other accounting methods, such as HIFO (Highest In, First Out) or Specific Identification (Spec ID), instead of FIFO. 

Additional Measures to IRS Crypto Tax Rule  

Since the IRS introduced the tax requirement, it has added new measures to strengthen its tax regulation on crypto. It implemented a new tax regime for crypto transactions in June 2024. However, it postponed the requirement for non-custodial wallets and decentralized finance (DeFi). 

Two months later, the regulator released the updated version of the 1099-DA tax form. This enhances users’ privacy and simplifies the reporting of crypto transactions. 

Last month, the IRS finalized the tax rule for DeFi brokers, mandating these platforms to follow similar reporting obligations as traditional brokers. Also, it maintained its stance on tax gains obtained through crypto staking despite legal actions filed to stop this from happening.