IRS Treats Crypto Swaps as Taxable Events, Expands Reporting Requirements
The IRS treats every cryptocurrency-to-cryptocurrency swap as a taxable disposal event. This means that even if you exchange one digital asset for another, like swapping Bitcoin for Ethereum or USDC, it triggers a capital gains or losses calculation based on fair market value.
When a taxpayer exchanges one cryptocurrency for another, the IRS considers this a disposal of the first asset. The disposal triggers a capital gains or losses calculation, which is calculated as the difference between the fair market value at the time of the swap and the original cost basis.
The IRS introduced Form 1099-DA in 2025 to standardize reporting for crypto transactions. Centralized exchanges like Coinbase, Kraken, and Gemini are required to report gross proceeds from all digital asset sales and swaps on this form.
Starting with 2026 transactions, brokers will be required to report both gross proceeds and adjusted cost basis for covered digital assets acquired after January 1, 2026. This means the IRS will receive a more complete picture of each taxpayer's crypto gains and losses directly from exchanges.