If you traded crypto in 2025, the IRS knows more about you than ever before. This year marks a major shift in how digital assets are reported—and ignoring it isn't an option anymore.
Let's break it down.
The Big Change: Form 1099-DA Is Here
Starting January 1, 2025, centralized exchanges like Coinbase, Kraken, and Gemini are required to report your crypto transactions directly to the IRS on a brand-new form: Form 1099-DA.
What this means for you:
→ The IRS will receive a copy of your gross proceeds from every sale or exchange
→ You'll get a copy too (by February 17, 2026)
→ If your return doesn't match the 1099-DA, expect a letter from the IRS
The era of "they won't know" is officially over.
What Actually Gets Taxed?
Not everything triggers a tax bill. Here's the quick breakdown:
✅ Taxable Events
Action | Tax Type |
|---|---|
Selling crypto for USD | Capital Gains |
Trading one crypto for another (BTC → ETH) | Capital Gains |
Spending crypto on goods/services | Capital Gains |
Getting paid in crypto | Ordinary Income |
Mining rewards | Ordinary Income |
Staking rewards | Ordinary Income |
Airdrops | Ordinary Income |
❌ Not Taxable
Buying crypto with USD and holding it
Transferring between your own wallets
Gifting crypto (up to $19,000 per recipient in 2025)
Donating to qualified charities
The Tax Rates: Know Your Numbers
Short-term gains (held ≤ 1 year):
Taxed as ordinary income → 10% to 37% depending on your bracket
Long-term gains (held > 1 year):
Preferential rates → 0%, 15%, or 20%
Filing Status | 0% Rate | 15% Rate | 20% Rate |
|---|---|---|---|
Single | Up to $48,350 | $48,351 – $533,400 | Over $533,400 |
Married Filing Jointly | Up to $96,700 | $96,701 – $600,050 | Over $600,050 |
Pro tip: A few extra days of holding can mean a 17%+ difference in your tax rate. Timing matters.
The Forms You'll Need
Here's your filing checklist:
Form 8949 — Report every crypto sale/exchange (gains and losses)
Schedule D (Form 1040) — Summary of your capital gains/losses
Form 1040 — Your main tax return (don't forget the crypto question on page 1!)
Form 1099-DA — The new form you'll receive from exchanges
If you earned crypto as income (mining, staking, freelance payments), report it as ordinary income on your 1040.
Calculate Your Gains: A Quick Example
Let's say you bought 1 ETH for $1,500 with a $50 transaction fee.
→ Your cost basis = $1,550
Later, you sell that ETH for $2,000.
→ Your taxable gain = $2,000 - $1,550 = $450
If you held for over a year? That $450 could be taxed at 0% if your income is low enough.
If you held for under a year? It's taxed at your ordinary income rate.
3 Smart Strategies to Lower Your Tax Bill
1. Hold for Over a Year
Long-term capital gains rates are significantly lower. Patience pays.
2. Tax-Loss Harvesting
Sold something at a loss? Use it to offset your gains. Losses can offset:
All your capital gains, plus
Up to $3,000 of ordinary income per year
Excess losses carry forward to future years
3. Track Your Cost Basis Religiously
Starting in 2026, exchanges will report your cost basis to the IRS. Get ahead of it now. Use crypto tax software like CoinLedger, TokenTax, or Koinly to automate tracking.
What About DeFi, NFTs, and Staking?
Staking: The IRS says staking rewards are taxable as ordinary income when received. Expect clearer guidance soon.
NFTs: Treated like other crypto. Sell for a profit? Capital gains. Some NFTs classified as "collectibles" may face a 28% max rate.
DeFi: Congress blocked the IRS from treating DeFi platforms as brokers (for now). But you're still responsible for reporting—keep your own records.
Stablecoins: Exchanges don't have to report qualified stablecoin sales under $10,000 on 1099-DA, but you still have to report them.
Key Deadlines
Deadline | What's Due |
|---|---|
February 17, 2026 | Exchanges send you Form 1099-DA |
April 15, 2026 | File your 2025 tax return |
Starting 2026 | Exchanges must report cost basis (not just proceeds) |
The Bottom Line
2025 is the year crypto taxes got real. The IRS has more visibility into your transactions than ever before, and the penalties for non-compliance aren't worth the risk.
Your action items:
Gather all your transaction records now
Use crypto tax software to calculate gains/losses
Consider consulting a tax professional if you have complex situations
File accurately and on time
The rules are tightening, but with the right preparation, you can stay compliant—and maybe even save some money along the way.
Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and subject to change. Please consult a qualified tax professional for advice specific to your situation.
By Ran Chen, EA, CFP®