How to Report Crypto on Taxes (2025)

How to Report Crypto on Taxes (2025)

By Jason Miller – Crypto Writer 10.expert 🧠 Covering Bitcoin, altcoins, blockchain & Web3.

As a crypto writer and analyst, the reality of taxation in the world of digital assets is a topic that can’t be ignored, no matter how much we prefer to focus on innovation and decentralization. The days of treating crypto as a Wild West with no tax implications are long gone. The IRS, along with tax authorities globally, has significantly ramped up its focus on digital asset reporting.

For the 2025 tax year (which you’ll be filing in early 2026), the landscape is becoming even more formalized in the U.S. Crucially, new reporting requirements under the Infrastructure Investment and Jobs Act (IIJA) are set to take effect. Starting January 1, 2025, crypto brokers (which includes centralized exchanges) will be required to report users’ digital asset sales to the IRS via the new Form 1099-DA. This will provide the IRS with significantly more data, making it harder for taxpayers to overlook their crypto obligations.

Understanding how to accurately report your crypto activity is not just about compliance; it’s about potentially saving money through strategic tax planning.

Let’s dive into how to report crypto on your taxes for the 2025 tax year.

How to Report Crypto on Taxes (2025): Navigating the Digital Asset Tax Landscape 📊📋

Navigating crypto taxes can seem daunting, but with the right understanding and tools, it’s manageable. Here’s what you need to know for the 2025 tax year.

Understand Crypto as “Property” (U.S. IRS Guidance) 💡

• IRS Stance: The U.S. IRS treats cryptocurrency as “property” for tax purposes, similar to stocks or real estate, rather than currency. This means every “disposal” of crypto (selling, trading, spending) triggers a taxable event.
• Capital Gains/Losses: This classification primarily leads to capital gains or losses when you sell, trade, or spend crypto.
• Ordinary Income: Certain crypto activities generate ordinary income.

Identify Taxable Events 🎯

• Selling Crypto for Fiat: Selling Bitcoin (BTC) for USD is a clear taxable event.
• Trading Crypto for Crypto: Swapping BTC for Ethereum (ETH) is also a taxable event. You’re effectively “selling” BTC and “buying” ETH.
• Spending Crypto: Using crypto to buy goods or services (e.g., using ETH to buy an NFT, or BTC for a coffee) is considered a taxable disposal.
• Receiving Crypto as Income:
  • Mining Rewards: Taxable as ordinary income at fair market value (FMV) when received.
  • Staking Rewards: Generally taxable as ordinary income at FMV when received.
  • Airdrops: Generally taxable as ordinary income at FMV when received.
  • Referral Bonuses/Payments for Services: Taxable as ordinary income at FMV when received.

Distinguish Between Short-Term and Long-Term Capital Gains/Losses 📅

• Holding Period: The amount of time you hold a crypto asset before disposing of it determines the tax treatment.
• Short-Term: Assets held for one year or less are subject to short-term capital gains rates, which are taxed at your ordinary income tax rates (usually higher).
• Long-Term: Assets held for more than one year qualify for long-term capital gains rates, which are generally lower (0%, 15%, or 20% depending on your income bracket). This incentivizes “HODLing.”

Calculate Cost Basis 💰

• What it is: Your cost basis is generally the original price you paid for a crypto asset, plus any fees associated with its acquisition (e.g., exchange fees, gas fees).
• Crucial for Gains/Losses: You subtract your cost basis from the sale price (or FMV when trading/spending) to determine your capital gain or loss.
• New 2025 Rule: Per-Wallet/Per-Account Basis: Beginning January 1, 2025, the IRS will no longer allow a “universal pool” cost basis tracking across all your wallets and exchanges. You’ll need to track cost basis on a per-wallet or per-account basis. Crypto tax software should assist with this transition.

Determine Your Gain or Loss 셈

• Formula: Proceeds - Cost Basis = Gain or Loss
• Example: You bought 1 ETH for $2,000 (cost basis) and later sold it for $3,000 (proceeds). Your capital gain is $1,000. If you sold it for $1,500, you have a $500 capital loss.

Utilize Crypto Tax Software (Highly Recommended) 💻

• Automation: Manually tracking thousands of transactions across multiple exchanges and wallets is extremely difficult and error-prone.
• Integration: Software like Koinly, CoinLedger, ZenLedger, TokenTax, or CoinTracker can integrate with hundreds of exchanges, wallets, and blockchains to import your transaction history.
• Report Generation: They automatically calculate gains/losses, income, and generate IRS-ready tax forms (Form 8949, Schedule D, Schedule 1).

Report Capital Gains and Losses on Form 8949 and Schedule D 📈📉

• Form 8949 (Sales and Other Dispositions of Capital Assets): You’ll list every individual crypto transaction that resulted in a capital gain or loss. This includes the asset, acquisition date, disposal date, proceeds, and cost basis.
• Schedule D (Capital Gains and Losses): This form summarizes the totals from Form 8949 and calculates your net short-term and long-term capital gains or losses. These totals then flow to your Form 1040.

Report Crypto Income on Schedule 1 or Schedule C 💸

• Schedule 1 (Additional Income and Adjustments to Income): Income from mining, staking, or airdrops is generally reported here under “Other Income.”
• Schedule C (Profit or Loss from Business): If your crypto activities (e.g., full-time mining, running a validator node, or an NFT business) constitute a trade or business, you might report income and related expenses on Schedule C.

Understand the New Form 1099-DA (Starting 2025) 📝

• Broker Reporting: Starting January 1, 2025, crypto exchanges and certain wallet providers (classified as “brokers” by the IRS) will be required to issue Form 1099-DA to users. This form will report gross proceeds from digital asset sales and transfers.
• IRS Data: This means the IRS will have more direct data on your crypto transactions. It’s crucial that your personal records align with what exchanges report.

Consider Tax Loss Harvesting 🚜

• Offsetting Gains: If you have capital losses from crypto (or other investments), you can use them to offset capital gains.
• Offsetting Ordinary Income: If your capital losses exceed your capital gains, you can deduct up to $3,000 of the remaining loss against your ordinary income annually ($1,500 for married filing separately).
• Carry Forward: Any excess losses can be carried forward indefinitely to offset future gains or income.
• No Wash Sale Rule (Currently): Unlike traditional securities, the “wash sale” rule (which prevents buying back a substantially identical asset within 30 days of selling it at a loss) does not currently apply to crypto. This may change in the future, so be aware.

NFTs and Taxes 🖼️

• Treated as Property: NFTs are generally treated as “digital assets” (property) by the IRS, similar to crypto.
• Capital Gains/Losses: Selling or trading NFTs triggers capital gains or losses.
• Collectibles Tax: Some NFTs might be classified as “collectibles,” which can have a higher long-term capital gains tax rate (up to 28% for assets held over a year, instead of 0-20%). This depends on what the NFT represents.
• Minting: Minting an NFT is generally not a taxable event, but the fees (gas) can be added to its cost basis.

Non-Taxable Events 🆓

• Buying Crypto with Fiat: Simply purchasing crypto with USD is not a taxable event.
• Holding Crypto: HODLing crypto in your wallet without selling, trading, or spending it does not trigger a tax event.
• Transferring Between Your Own Wallets: Moving crypto between your own wallets or exchanges (where you retain ownership) is not taxable.
• Gifting Crypto: Gifting crypto is generally tax-free below the annual gift tax exclusion ($19,000 per recipient for 2025). Gifts above this amount may require filing Form 709, but typically don’t incur gift tax unless you exceed your lifetime exemption ($13.99 million for 2025). Receiving a gift is not taxable to the recipient.

Keep Meticulous Records ✍️

• Proof is Key: Even with software, maintaining your own records of dates, amounts, transaction IDs, addresses, and fair market values for every crypto transaction is crucial in case of an IRS inquiry.

Consult a Tax Professional (Especially for Complex Cases) 🧑‍💼

• Niche Expertise: Crypto tax laws are still evolving and can be complex, especially with DeFi activities (liquidity pooling, yield farming, collateralized loans).
• Complex Situations: If you have high transaction volume, engage in advanced DeFi strategies, or have significant gains/losses, a crypto-savvy tax accountant can provide tailored advice and ensure compliance.

Stay Informed on Evolving Regulations 📰

• The crypto tax landscape is dynamic. Keep an eye on IRS announcements, Treasury Department guidance, and relevant legislation. Laws can change, affecting how crypto is reported in future tax years.

While the increased reporting requirements for 2025 might seem daunting, they also bring more clarity to an area that was previously ambiguous. By understanding the fundamentals and leveraging available tools, you can confidently report your crypto on taxes and ensure compliance.