Crypto Taxes Overview

Crypto isn't just magic internet money anymore—the IRS treats it like property, similar to stocks or real estate. That means most activities involving crypto can trigger taxes, and with new rules kicking in for 2025, staying on top of this is crucial.

Ignoring it? Bad idea—penalties can add up fast, especially now that exchanges are reporting your transactions directly to the IRS. But the good news? Once you get the basics, tracking becomes routine.

2025 Game Changer: Starting in 2025, if you sold, traded, or earned crypto worth over a certain amount, you'll likely get a Form 1099-DA from your exchange. It's like a 1099-B for stocks, reporting your gross proceeds to the IRS. The days of crypto flying under the radar? They're over.

Who This Applies To: Pretty much anyone in the US who's touched crypto—traders, hodlers, miners, or even if you got paid in Bitcoin for freelance work. If you bought, sold, swapped, staked, or earned crypto, you've probably got some tax obligations.

Not every crypto move is taxable, but many are. Here's a clear list of what counts as a "taxable event"—basically, when the IRS wants a piece.

Common Taxable Events

• Selling crypto for fiat (USD, EUR, etc.) — Capital gain or loss based on purchase price vs. sale price
• Trading one crypto for another — Including stablecoin swaps (e.g., USDC to USDT). The IRS treats this as selling the first crypto and buying the second
• Using crypto to buy goods/services — Every purchase is technically a taxable event, treated as selling the crypto first
• Receiving crypto as payment — If you get paid in Bitcoin, Ethereum, or any crypto, report it as ordinary income at fair market value
• Staking rewards — Earned crypto from staking is taxable income when you receive it
• Mining income — Crypto you mine is taxable as ordinary income at fair market value when received
• Airdrops — Free crypto from airdrops is taxable income when you receive it
• Forks — New coins from forks (like Bitcoin Cash from Bitcoin) are taxable income when received
• NFT sales/minting — Selling NFTs triggers capital gains/losses. Minting may be taxable depending on circumstances (scrutiny increasing in 2025)
• DeFi yield farming — Earning rewards from liquidity pools, lending, or other DeFi protocols is taxable income when received

Quick Decision Guide: Is This Taxable?

Real-World Examples

Pro Tip: Keep records of every transaction's date, amount, and value in USD. Trust me, trying to reconstruct this at tax time is a nightmare. Use spreadsheets or (better yet) crypto tax software that auto-imports from exchanges.

Not everything is taxable! Here's what you can do without triggering a tax event:

Important: Even though these events aren't taxable, you should still keep records. Transfers between wallets help establish your cost basis tracking, and gift records are important for estate planning.

This is where the math comes in, but don't worry—it's doable step by step.

Cost Basis Basics

Your "cost basis" is what you paid for the crypto, including fees. When you sell, the difference between sale price and cost basis is your gain or loss. Methods matter: FIFO (First In, First Out) assumes you're selling the oldest coins first. HIFO (Highest In, First Out) sells the most expensive ones. Choose wisely to minimize taxes.

Short-Term vs. Long-Term Capital Gains

Hold for over a year? Long-term rates (0-20% depending on income). Under a year? Ordinary income rates (up to 37%). That's a huge difference—patience literally pays.

Example: HODL Pays Off

You bought 1 BTC for $40,000 in January 2024

By waiting 8 more months, you save $2,000 in taxes. That's the power of long-term capital gains.

Offsetting Losses: Had a bad trade? Use losses to reduce gains. Losses over your gains? You can deduct up to $3,000 against ordinary income each year and carry forward extras to future years. Silver lining to a rough market.

Filing time! For most folks, this hits the standard April 15 deadline (or October with an extension).

Forms You'll Need

Where to Start: First question on your Form 1040: "At any time during 2025, did you receive, sell, exchange, or otherwise dispose of any digital assets?" Answer honestly. Yes or no—don't skip it. The IRS cross-checks this with exchange reports (especially now with Form 1099-DA).

If your activity is minimal (under $600 in some cases), reporting might be straightforward. But always track everything—better to have records you don't need than need records you don't have.

Crypto rules are evolving fast—here's the latest scoop on 2025 changes and what's coming.

🚨 Form 1099-DA Broker Reporting (Effective January 2025)

Starting January 2025, custodial platforms like Coinbase, Kraken, and Binance.US must report your sales to the IRS via Form 1099-DA. This makes it way harder to "forget" transactions—Big Brother is watching. The upside? You'll get better reporting from exchanges, making your life easier come tax time (assuming their data is accurate—always double-check).

🚨 Wallet-by-Wallet Cost Basis Requirement (Effective January 1, 2025)

Major change: As of January 1, 2025, the universal method (pooling all wallets together) is no longer allowed. You must track cost basis separately for each wallet/account. This means if you have Bitcoin in Coinbase, Kraken, and a hardware wallet, each needs its own cost basis tracking.

IRS Safe Harbor (Rev. Proc. 2024-28): The IRS provided a safe harbor that let people allocate unused basis reasonably before their first 2025 trade. If you had multiple wallets before 2025, you could allocate your total cost basis across them in a reasonable manner. This was a one-time opportunity—make sure you documented it if you used it.

✅ DeFi Broker Reporting Rule Repealed (Early 2025)

Congress successfully repealed the controversial DeFi broker reporting rule in early 2025. This means non-custodial/DeFi platforms remain exempt from 1099-DA issuance for now. If you're using Uniswap, Aave, or other DeFi protocols, you won't get a 1099-DA from them—but you're still responsible for reporting your transactions.

❌ Wash Sale Rules Do NOT Apply to Crypto (2025)

Important clarification: Wash sale rules still do NOT apply to crypto in 2025, unlike stocks. This is a common misconception, but the IRS has not extended wash sale rules to crypto yet. You can still deduct losses even if you rebuy the same crypto within 30 days. This gives crypto traders more flexibility than stock traders.

Cost Basis Reporting (Coming 2026)

By 2026, brokers will also report your cost basis on Form 1099-DA, simplifying gain/loss calculations. Until then, you're responsible for tracking what you paid for each crypto in each wallet.

Emerging Discussions (Not Law Yet)

There are ongoing discussions about potential future changes, but these are not law yet:

Stay tuned: We'll update this page as laws change. For now, treat staking rewards as income when received, and report all transactions regardless of size.

Check out our Bitcoin Taxes and Ethereum Taxes pages for coin-specific details.

Make taxes less of a chore with these helpers—and avoid the mistakes that trip people up.

Tracking Software (Your Best Friend)

Don't track manually if you can avoid it. These tools connect to your exchanges and wallets, auto-import transactions, and generate tax reports. 2025 Update: Most major platforms now support wallet-by-wallet cost basis tracking, which is essential for 2025 compliance:

Important: When choosing software, verify it supports wallet-by-wallet cost basis tracking (required as of Jan 1, 2025). Most platforms updated in late 2024/early 2025, but double-check before committing.

2025 Crypto Tax Prep Checklist

Stay organized with this checklist for 2025 tax prep:

Official IRS Resources

Always refer to official IRS guidance for the most current information:

Avoid These Mistakes

Tax-Saving Ideas

Sometimes DIY just doesn't cut it. Consider hiring a CPA who knows crypto if you:

A good crypto-savvy CPA might cost $500-$2,000+ depending on complexity, but they can often save you more than that in taxes—and keep you out of trouble. Especially important post-2025: With new reporting requirements and wallet-by-wallet basis tracking, professional help can be worth it.