In the US, the IRS has made it clear: crypto is property, not currency. That means every time you sell, trade, or even spend crypto, it’s a taxable event.
With new broker reporting rules rolling out in 2025 and the IRS using blockchain analytics to track wallets, there’s nowhere to hide. If you hold, stake, or trade crypto in the US, here’s exactly how taxes work 👇
🔎 How the IRS Views Crypto
- Crypto is treated as property (IRS Notice 2014-21).
- Disposals = taxable events, including:
- 💵 Selling for USD/fiat
- 🔄 Swapping crypto for another token
- 🛒 Spending crypto on goods/services
- 🎁 Receiving crypto as income (mining, staking, airdrops)
💰 Capital Gains Tax (CGT)
- Short-term gains (held ≤ 12 months) → taxed as ordinary income (10%–37%).
- Long-term gains (held > 12 months) → taxed at 0%, 15%, or 20%, depending on income.
Example:
- Buy 1 BTC for $20,000.
- Sell for $30,000 after 14 months.
- $10,000 long-term gain → taxed at 15% if you’re in the middle bracket.
👉 The holding period makes a huge difference in what you pay.
🧾 Income Tax on Crypto
Some activities are taxed as ordinary income when received:
- Mining & staking rewards → income at fair market value (FMV) on day received.
- Airdrops & hard forks → income when you gain control of tokens.
- DeFi rewards/yield farming → generally income when received.
- Later disposals → trigger capital gains tax again.
💡 Double taxation trap: you’re taxed when you earn crypto and when you later sell it.
🎨 NFTs, DAOs & DeFi
- NFTs – selling NFTs you created = income; trading NFTs = capital gains.
- DAOs – participation may count as partnership income or self-employment income (complex area).
- DeFi – lending, liquidity pools, farming rewards → income when received, then CGT on disposal.
📉 Losses & Wash Sales
- Capital losses offset gains.
- If losses exceed gains, up to $3,000/year can offset ordinary income (excess carried forward).
- Wash sale rule currently does not apply to crypto, so you can sell at a loss and rebuy immediately to harvest losses (though Congress has debated closing this loophole).
🕵️ IRS Enforcement in 2025
- 1099-DA forms: From 2025, brokers/exchanges must report crypto trades to the IRS.
- Blockchain surveillance (Chainalysis, Palantir) tracks transactions.
- Failure to report can lead to:
- Back taxes + interest
- Penalties up to 75% of underpaid tax
- In extreme cases, criminal charges 🚨
🛠️ Compliance Checklist
- Track everything – date, cost basis, FMV at disposal.
- Use tax software/pros – manual tracking is nearly impossible for active traders.
- Report properly –
- Form 8949 + Schedule D → gains/losses.
- Schedule 1/C → income from staking, mining, airdrops.
- File annually – don’t ignore crypto; the IRS will know.
✅ Key Takeaways (US)
- Crypto = property, taxed under CGT and income rules.
- Holding period matters: short-term = ordinary income rates, long-term = lower rates.
- Staking, mining, airdrops, DeFi = income when received.
- 1099-DA forms in 2025 give IRS direct visibility.
- Losses can soften the blow, but only if reported.