IRS Sets Crypto Tax Reporting Rules for 2025, Defers DeFi and Non-Custodial Regulations

The IRS has established a reporting system for crypto brokers, mandating the filing of 1099 forms similar to traditional investment firms. However, regulations for decentralized finance (DeFi) and non-hosted wallet providers have been postponed until later in the year. This new rule will take effect for transactions starting in 2025 and will require brokers to track the cost basis of their customers' tokens beginning in 2026. The IRS has exempted most routine stablecoin sales and set a $600 annual threshold for NFT proceeds before they need to be reported. Although the IRS acknowledges that non-custodial industry participants should be considered brokers, the agency needs more time to consider the complexities associated with them. The agency also clarified that its attempt to classify crypto assets is not intended to influence the ongoing debate between the Securities and Exchange Commission (SEC) and the industry on whether tokens are securities or commodities. This rule will affect approximately 15 million individuals and 5,000 firms, and the IRS is committed to monitoring the implementation of the new rules and making adjustments if necessary.