Quick snapshot: how the IRS sees crypto in 2025

• Property, not currency: Digital assets are generally taxed like property (think stocks), not like dollars.
• Disposals trigger gains/losses: Selling for USD, swapping one coin/NFT for another, or spending crypto is a taxable disposal.
• Some receipts are ordinary income: Mining, staking, referral rewards, airdrops, interest-like yield—usually taxed as income when you receive/control it.
• Form 1040 has a digital assets question: You must answer it truthfully each year.

Nothing here is personal tax advice; use this as a practical overview and confirm specifics with a qualified tax professional or the IRS.

What’s taxable vs not taxable

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Income events (mining, staking, airdrops, yield)

When you receive new coins/tokens as rewards, that amount is usually taxable as ordinary income at its fair market value when you can control/dispose of it. Later, when you sell those coins, you’ll have a capital gain/loss measured from that income basis.

• Mining: Income at receipt; if you mine as a business, self-employment rules may apply.
• Staking: Income at receipt/claim, depending on access and control.
• Lending/yield: Platforms may characterize payouts differently; keep detailed statements.
• Airdrops/forks: Typically income when credited and under your control.

Capital gains, cost basis, and holding periods

Capital gain/loss = Proceeds – Cost basis. Basis generally includes purchase price plus fees. Your holding period (how long you held before disposing) determines short-term vs long-term rates.

• Short-term: Held ≤ 1 year → taxed at ordinary income rates.
• Long-term: Held > 1 year → generally lower preferential rates.

Wash-sale rules have historically applied to stocks and securities. As of 2025, crypto is not explicitly covered under the traditional wash-sale statute; proposals exist, so check current guidance before planning any loss-harvesting strategy.

How to file crypto taxes (5 steps, the forms you need)

1. Aggregate every transaction from exchanges, wallets, and on-chain activity. Export CSVs where possible.
2. Normalize prices to USD at the time of each taxable event (most tax tools handle this automatically).
3. Calculate gains/losses using a consistent accounting method (e.g., FIFO, specific identification when supported).
4. Report capital gains/losses on Form 8949 (each disposal) and summarize on Schedule D.
5. Report income items (staking, mining, airdrops, interest-like receipts) as ordinary income on your return; if operating a business, include on the appropriate schedules.

Also, answer the digital assets question on Form 1040 accurately. If an exchange or platform issues you an information statement, reconcile it with your own records.

Record-keeping checklist (so April isn’t chaos)

• All trade/swap/spend dates, amounts, and fees (in USD).
• Wallet addresses you control and transaction IDs for major transfers.
• Income events log (rewards, airdrops) with USD values at receipt.
• Method used for basis (FIFO, specific ID) and any lot selection evidence.
• Copies of exchange CSVs, platform statements, and any 1099s you receive.

If you automate trading or use DeFi frequently, consider crypto tax software early—back-filling thousands of lines in March is painful.

DeFi & NFTs: gray areas explained simply

DeFi transactions often combine swaps, rewards, and fees in complex flows. Practical rules of thumb:

• Swapping tokens in a DEX pool: Treat as a disposal of the token you give up.
• LP positions: Entering/exiting a pool can trigger disposals and income—export those logs.
• NFTs: Buying with crypto is a disposal of the crypto; selling the NFT later is another disposal with gain/loss. Creator royalties are typically ordinary income.

Documentation and intent matter. When in doubt, annotate transactions and keep TX hashes—good records are your safety net.

State taxes, losses, and simple optimization

• States vary: Some have no income tax; others tax all income (including gains). There’s usually no special long-term preference at the state level.
• Offsetting gains with losses: Capital losses can offset capital gains; net losses may be deductible up to annual limits with carryforwards.
• Holding > 1 year: Often reduces federal tax via long-term rates.
• Donations: Donating appreciated crypto directly to eligible charities can reduce taxes vs selling then donating cash.

Outside the US? A brief EU snapshot

EU member states differ but increasingly align under broader frameworks. Sales of crypto can be taxable as capital gains; some countries exempt long-held assets, others do not. VAT generally doesn’t apply to simply exchanging crypto for fiat. Always check your local authority’s latest rules.

FAQ

Do I owe tax if I only moved coins between my own wallets?

No. Transfers between wallets you control are not taxable. Keep records to show it’s you on both ends.

Are stablecoins taxable?

Buying/holding is not taxable. But selling, swapping, or spending a stablecoin is still a disposal with potential gain/loss (usually small). Learn how stablecoins work in our 2025 guide.

What happens if I don’t report?

Penalties and interest can accrue; in serious cases, enforcement actions apply. Exchanges routinely share information with tax authorities.

What forms do I actually need?

Commonly: Form 8949 (detailed disposals), Schedule D (summary), standard Form 1040 (with the digital assets question), and ordinary income reporting for rewards.