Crypto Tax in the USA: What You Need to Know for 2025

Crypto investors in the U.S. are heading into 2025 with more scrutiny than ever before. The IRS has introduced new reporting rules, sharper enforcement, and fresh deadlines that bring digital assets firmly into focus. For most taxpayers, the deadline to file is April 15, 2025, while those living abroad have until June 15. If you file for an extension, the final deadline lands on October 15.

With mandatory broker reporting through Form 1099-DA starting this year, plus stricter wallet-by-wallet accounting, the IRS is closing the gaps that once made crypto hard to track. Whether you’re casually holding or actively trading, understanding how crypto is taxed in 2025 is important to avoid costly penalties and planning your strategy wisely.

How Crypto Is Taxed in the US

In the eyes of the IRS, cryptocurrency is not treated like cash, it’s classified as property. This means crypto is taxed much like stocks or real estate, with transactions falling into two main categories: capital gains and income.

If you sell, trade, or spend crypto, you trigger a taxable event and may owe capital gains tax on any profits. Gains depend on the difference between your purchase price (cost basis) and the market value at the time of the transaction. The tax rate itself depends on how long you held the asset and your income level.

On the other side, crypto earned through activities like mining, staking, airdrops, or receiving crypto as payment is taxed as ordinary income. In these cases, the fair market value at the time you receive the crypto counts as income, and it’s taxed according to your regular income tax bracket.

The IRS expects you to keep detailed records of every transaction. In 2025, this is no longer optional.

Capital Gains Tax on Crypto

When you sell or trade crypto for more than you paid, the IRS treats it as a capital gain. The rate you’ll pay depends on how long you held the asset before selling.

If you held it for a year or less, it counts as a short-term gain and is taxed at your ordinary income rate. If you held it for more than a year, you qualify for long-term capital gains rates, which are generally lower.

Here’s how the brackets look for the 2024 tax year (filed in 2025):

Short-Term Capital Gains (Held 1 Year or Less)

Long-Term Capital Gains (Held Over 1 Year)

NFTs: Higher Rates for Collectibles

NFTs fall under their own category. If the IRS classifies an NFT as a collectible. For example, if it represents artwork or antiques, the long-term capital gains rate can reach 28%, which is higher than the standard rate for other crypto assets. Short-term gains on NFTs are taxed as ordinary income, just like short-term crypto trades.

The IRS determines if an NFT counts as a collectible based on what the token represents, not just the token itself. If you’re unsure, it’s best to check with a tax professional to avoid surprises.

Income Tax on Crypto

Not every crypto transaction falls under capital gains. In many cases, crypto earnings are taxed as ordinary income, based on the fair market value of the asset when you receive it. The IRS treats these like regular wages or business income, which means they’re taxed at your standard income tax rate.

This applies to a wide range of activities, from mining new coins to receiving staking rewards, airdrops, or referral bonuses. Once you sell or trade the crypto you’ve earned, any gain or loss from the sale is treated as a separate capital gain or loss.

The key rule: if you’re earning crypto through effort or participation, it counts as income. You’re expected to report the value at the time of receipt, even if you haven’t converted it to cash.

Non-Taxable Crypto events

Not every crypto move triggers a tax bill. Some activities are non-taxable because they don’t involve selling, earning, or disposing of crypto in a way that creates income or gains. Still, it’s smart to keep good records, as these actions might affect future tax calculations.

• Holding crypto (HODLing): Simply holding onto your crypto doesn’t create a taxable event. Taxes only apply when you sell, trade, or otherwise dispose of the asset.
• Transferring crypto between personal wallets: Moving assets between your own wallets, or from an exchange to your wallet, doesn’t count as income or a taxable sale.
• Gifting crypto (within limits): You can gift crypto up to the annual exclusion limit without triggering taxes. For 2025, the limit is $19,000 per recipient.
• Donating crypto to qualified charities: Donations to registered 501(c)(3) organizations are not taxable. In fact, they may qualify for a deduction based on the crypto’s fair market value at the time of the donation.

While these actions are non-taxable, you still need to document them properly. Tracking the original cost basis and the dates of these movements is essential for accurate reporting when you eventually sell or use the assets.

2025 IRS Updates

Crypto tax reporting is entering a new phase in 2025, with the IRS tightening its grip on digital assets. Several important changes are now in effect, and staying ahead of them is crucial if you want to avoid surprises.

Starting this year, crypto brokers, including exchanges and certain payment processors, must report users’ sales and exchanges of digital assets to the IRS using the newly introduced Form 1099-DA. This form covers gross proceeds from crypto transactions, making it harder for taxable events to slip through the cracks. Even if you don’t receive the form, you’re still responsible for reporting all taxable activity.

Gone are the days of using a universal basis method across all your wallets. As of 2025, the IRS requires cost basis tracking to be done per wallet. For every wallet you own, you’ll need to calculate gains and losses individually, which makes accurate record-keeping more important than ever.

To ease the transition, the IRS has introduced a temporary safe harbor for 2025. Until the end of the year, taxpayers and exchanges can use alternative identification methods for digital assets, giving everyone time to adjust to the new requirements.

While taxpayers still have flexibility in 2025, this is the last year to choose methods like HIFO (Highest In, First Out) or Specific Identification for calculating gains. From January 1, 2026, FIFO (First In, First Out) becomes mandatory. Planning ahead now can help you avoid an unexpected tax hit later.

Deductions and Offsets

Crypto losses aren’t just setbacks since they can lower your tax bill if you handle them properly. The IRS allows you to use crypto losses to offset taxable gains, and if your losses exceed your gains, you can deduct up to $3,000 against your ordinary income for the year. Any remaining losses roll over to future years until fully used.

This is where tax-loss harvesting comes in. Selling underperforming crypto at a loss can help balance out gains from other assets, trimming your overall tax liability.

Trading fees also work in your favor. Fees paid to exchanges for executing trades are deductible and reduce the total gain or increase the total loss on the transaction. However, network transfer fees, like gas fees for moving crypto between wallets, aren’t deductible.

If you’ve lost funds in an exchange bankruptcy, you can typically treat these losses as capital losses. While it won’t recover your funds, it helps soften the tax impact.

Finally, it’s worth noting that the wash sale rule, which blocks investors from claiming a loss if they repurchase the same asset within 30 days, doesn’t currently apply to crypto. This gives you more flexibility with loss-harvesting strategies, although future rule changes could close this gap.

Penalties and IRS Tracking

Failing to report crypto taxes accurately can lead to serious penalties. The IRS treats crypto non-compliance like any other tax violation, and enforcement has stepped up alongside new reporting requirements.

If you underreport or fail to report crypto activity, you could face:

• Fines up to $100,000 for individuals.
• Up to 75% of unpaid tax as a penalty for substantial understatements.
• Interest on unpaid amounts, which accrues until the balance is cleared.
• In severe cases, criminal charges and up to five years in prison.

These penalties generally apply in clear cases of tax fraud or willful neglect. Filing mistakes due to complexity are less likely to trigger harsh consequences, but accuracy is still critical.

The IRS isn’t relying on self-reporting alone. Crypto exchanges are now required to report user activity through forms like 1099-DA, and the IRS works with blockchain analytics firms to track on-chain activity. Tools like Chainalysis allow the IRS to trace transactions even if they move through multiple wallets or exchanges. If you think unreported crypto can slip under the radar, the tools in place for 2025 say otherwise.

Reporting & Filing Crypto Taxes

When it’s time to file, crypto activity flows through several IRS forms, depending on how you’ve earned or traded digital assets. Accurate records are essential, especially with wallet-by-wallet accounting now in place.

To simplify recordkeeping and filing, many crypto investors use tracking tools from platforms like Blockpit. These platforms sync with exchanges and wallets to calculate gains, track cost basis, and generate tax reports, making filing smoother, especially with multiple wallets in play.

Strategies to Reduce Crypto Tax

Good tax strategy starts before you file. With the right approach, you can legally reduce your crypto tax burden and keep more of your profits.

Holding crypto for over a year unlocks lower long-term capital gains rates, 0%, 15%, or 20%, depending on your income. If you’re looking to sell, timing matters. Waiting until you cross the one-year mark can make a noticeable difference.

Selling crypto at a loss can offset your capital gains and reduce your taxable income by up to $3,000. Since the wash sale rule doesn’t apply to crypto (for now), you have flexibility in how and when you harvest losses.

Some self-directed IRAs and retirement accounts now allow crypto investments. While not all providers offer this, investing through a tax-advantaged account can defer taxes or, in the case of a Roth IRA, potentially eliminate them altogether.

Donating crypto directly to a qualified 501(c)(3) charity not only avoids capital gains taxes but also allows you to claim a deduction based on the asset’s fair market value at the time of donation. For larger donations over $5,000, you’ll need a qualified appraisal.

If you expect to owe more than $1,000 in taxes from crypto activity, the IRS expects you to make estimated payments throughout the year. This helps you avoid penalties for underpayment when you file.

Conclusion

The rules for crypto taxes in the U.S. are clearer in 2025, but they’re also stricter. With new IRS forms, tighter reporting standards, and mandatory wallet-level accounting, there’s less room for error, and less tolerance for it. Staying compliant means keeping accurate records, understanding how your crypto activity is taxed, and planning your strategy ahead of time. Whether you’re trading daily or holding long term, staying ahead of tax obligations is just as important as managing your portfolio.

Frequently Asked Questions (FAQ)

Is crypto taxed as property or currency in the U.S.?

The IRS treats crypto as property, not currency. This means buying and holding crypto isn’t taxable, but selling, trading, or earning it can trigger capital gains or income tax depending on the activity.

What’s the difference between short-term and long-term capital gains on crypto?

Short-term gains apply to crypto held for one year or less and are taxed at your ordinary income rate. Long-term gains apply if you hold for more than a year, usually at lower rates of 0%, 15%, or 20%, depending on your income.

Are mining and staking rewards taxed when I earn them or when I sell?

Mining and staking rewards are taxed as income when you receive them, based on their fair market value at that time. Later, if you sell the rewards, any price change counts as a separate capital gain or loss.

Do I pay taxes when transferring crypto between my own wallets?

No. Moving crypto between wallets you own isn’t a taxable event. Taxes only apply when you sell, trade, or use crypto in a way that creates income or a gain.

What is Form 1099-DA, and how does it affect my crypto taxes?

Form 1099-DA is the IRS’s new form for digital asset reporting. Starting in 2025, crypto brokers must report your crypto sales and exchanges using this form, increasing IRS visibility into your activity.

Can I deduct crypto trading losses from my taxes?

Yes. Crypto losses can offset capital gains, and if your losses exceed your gains, you can deduct up to $3,000 against your ordinary income. Losses beyond that carry forward to future years.

How does the IRS track crypto transactions?

The IRS receives reports directly from crypto exchanges and works with blockchain analytics firms to trace transactions. Even without a direct report, on-chain activity is increasingly visible to tax authorities.

Which tax forms do I need to file for my crypto activity?

Most taxpayers will use Form 1040, along with Form 8949 and Schedule D to report capital gains and losses. If you earn crypto income, additional forms like 1099-DA, 1099-B, or Schedule C (for business activity) may also apply.

What’s the most effective way to reduce crypto taxes legally?

Holding assets for over a year to qualify for long-term capital gains rates, harvesting losses to offset gains, and considering donations to qualified charities are some of the most effective strategies. Planning ahead makes the biggest difference.