Cryptocurrency on Taxes
Cryptocurrency isn’t just a buzzword anymore—it’s a legitimate form of investment and payment. But with it comes IRS scrutiny. In 2025, if you buy, sell, stake, mine, or receive crypto in any form, you likely have tax reporting obligations. Here’s how to stay compliant.
Key IRC Sections and IRS Forms
- IRC §1001(a) – Sale or exchange of property (capital gains/losses)
- IRC §61 – Gross income includes crypto received for work
- IRC §83 – Property transferred for services (applies to mining/staking)
- IRC §31 – Non-recognition for like-kind exchanges (crypto no longer qualifies)
- Form 8949 – Sales and dispositions of capital assets
- Schedule D – Capital gains and losses summary
- Schedule 1 (Form 1040) – Other income
- Form 1040 – Crypto question at the top
- Form 1099-DA – Expected for crypto exchanges in 2025
Taxable Crypto Events
- Selling crypto for fiat (e.g., USD)
- Trading one crypto for another (e.g., ETH to BTC)
- Using crypto to buy goods or services
- Earning crypto from mining, staking, or airdrops
- Receiving crypto as payment for services
Non-Taxable Crypto Events
- Buying crypto with fiat and holding it
- Transferring crypto between your wallets
- Gifting crypto (up to annual exclusion limit)
Example: Trading ETH for USDC
Scenario: Alex bought 1 ETH in January 2023 for $1,200. In June 2025, he traded 1 ETH for $2,000 worth of USDC.
- Capital gain: $2,000 – $1,200 = $800
- Report this on Form 8949 and Schedule D
- If he earned staking rewards of $500 in 2025, report on Schedule 1 as ordinary income
Step-by-Step IRS Crypto Reporting
- Identify All Crypto Transactions
Use exchange CSVs, wallets, and aggregators (like CoinTracker or Koinly) - Calculate Gains/Losses
- Cost basis vs. fair market value at sale/exchange date
- Long-term (>12 months) vs. short-term (<12 months)
- Classify Income vs. Capital Gain
- Mining/staking = ordinary income
- Selling/trading = capital gain
- Complete Required IRS Forms
- Form 8949 + Schedule D for gains/losses
- Schedule 1 (1040) for income
- Answer “Yes” to the crypto question on Form 1040
- Maintain Documentation
- Retain transaction logs, wallet addresses, exchange reports, and FMV calculations
Conclusion
Crypto taxes are complex but manageable. With accurate records and timely filing, you can stay compliant and avoid penalties. Every crypto investor—from hobbyist to DeFi whale—should treat tax reporting as non-negotiable.
Call to Action
Anshul Goyal, CPA EA FCA is a U.S.-licensed CPA, IRS Enrolled Agent, and cross-border tax strategist. He helps U.S. investors, founders, and Indian expatriates Manage cryptocurrency taxation and regulatory compliance.
Disclaimer
This blog is for educational purposes only and does not constitute financial or legal advice. Consult a qualified tax advisor for your specific crypto transactions.
Top 5 Crypto Tax FAQs
1. Do I have to report crypto if I only held it?
No, buying and holding without any other activity is not taxable, but still report the activity when asked on Form 1040.
2. What if I didn’t get a 1099 from the exchange?
You’re still required to report crypto transactions. Use your own records.
3. How is staking taxed?
Staking rewards are taxed as ordinary income under IRC §83 and reported on Schedule 1.
4. Can I deduct crypto losses?
Yes, up to $3,000 of net capital losses can be deducted annually.
5. What if I use crypto for everyday purchases?
You still need to report the capital gain or loss on that transaction.
About Our CPA
Anshul Goyal, CPA EA FCA, is a licensed U.S. CPA, Enrolled Agent, and Fellow Chartered Accountant with over 10 years of experience advising on cryptocurrency taxation, cross-border filings, and IRS audits.