2025 Cryptocurrency Tax Guide: Rules, Rates, and Reporting Steps

Cryptocurrency is a digital asset that uses cryptography to secure transactions and control the creation of new units. Understanding cryptocurrency tax obligations is essential because the IRS now treats crypto like stocks, with strict reporting requirements that started on January1,2025. Whether you mine coins, stake tokens, or simply trade on a centralized exchange, you need a clear roadmap to avoid penalties and keep more of your earnings.

Key Takeaways

• 2025 is the first year exchanges must file Form1099‑DA reporting gross proceeds, but cost‑basis reporting begins in 2026.
• Hold crypto for ≥366days to qualify for long‑term capital‑gain rates (0‑20%); otherwise gains are taxed as ordinary income (10‑37%).
• Mining, staking and airdrops count as ordinary income at fair market value when received.
• Decentralized exchanges (DEXs) are exempt from the 1099‑DA requirement, so you must track those trades yourself.
• Use FIFO by default unless you can prove a specific‑identification method; software can help, but professional advice is often needed.

Who Must Report Crypto in 2025?

IRS is the United States tax authority that enforces crypto reporting rules. The agency classifies crypto as property, meaning every sale, exchange, or other disposition triggers a taxable event. In 2025, two primary groups face reporting duties:

1. Taxpayers who sold, swapped, or used crypto to pay for goods/services.
2. Taxpayers who earned crypto as wages, mining rewards, staking yields, or airdrops.

If you performed either action, you must file Form8949 and ScheduleD for capital gains, plus Schedule1 for ordinary‑income events.

Understanding the Tax Mechanisms

Crypto transactions fall into three categories:

• Ordinary Income - Mining, staking, airdrops, and crypto‑paid wages are taxed at regular income rates (10‑37%).
• Short‑Term Capital Gains - Any crypto held ≤365days before disposal is taxed as ordinary income.
• Long‑Term Capital Gains - Assets held ≥366days qualify for reduced rates (0‑20%).

The holding‑period rule mirrors the stock market, but the challenge lies in tracking dozens of wallets and exchange‑to‑exchange moves.

2025 Tax Rates at a Glance

These rates apply to the net gain after subtracting your cost basis. If you end the year with a net loss, you can offset up to $3,000 of ordinary income and carry the rest forward.

Form1099‑DA: What It Is and How It Affects You

Form1099‑DA is the new IRS information return that brokers use to report gross proceeds from crypto sales. Starting 2025, major exchanges (Coinbase, Kraken, Binance.US, etc.) must send a 1099‑DA to both you and the IRS for any taxable event exceeding $600. The form shows only the sale price; it does NOT include your original cost basis. That omission means you must independently calculate cost basis for each transaction.

Key points:

• Expect one 1099‑DA per exchange where you sold or swapped crypto.
• If you transferred crypto between wallets on the same exchange, the platform may mistakenly treat the move as a sale. Double‑check the “transaction type’’ column.
• Cost‑basis reporting begins on January1,2026, so 2025 filings rely on your own records.

How to Calculate Cost Basis

The IRS default method is FIFO (first‑in, first‑out). Under FIFO, the earliest purchased coins are considered sold first. If you can prove a different order (specific identification), you may achieve a lower tax bill, but you must keep detailed records.

Steps to compute FIFO manually:

1. Export a CSV of all purchases (date, amount, USD value) from each exchange.
2. Sort the list chronologically.
3. When you sell, match the sale amount against the earliest rows until the total sold is covered.
4. Calculate gain = sale proceeds - sum of matched purchase values.

Most active traders find this tedious, so many turn to crypto‑tax software (TurboTax Crypto, CoinTracker, Koinly). The software can generate a pre‑filled Form8949, but remember that the 2025 1099‑DA only supplies gross proceeds; you still need to import your purchase history.

Special Income Events: Mining, Staking, Airdrops

These events generate ordinary income at the fair market value (FMV) on the day you receive the tokens.

• Mining rewards: Treated like self‑employment income. You may need to file ScheduleC and pay self‑employment tax (15.3%).
• Staking yields: Taxed as ordinary income when earned; later disposals are capital gains.
• Airdrops: FMV on receipt is ordinary income; if you later sell, you calculate gain based on the FMV used as basis.

Keep a spreadsheet that logs token, date, FMV, and source (e.g., “Coinbase staking reward - 0.075ETH - $1,340”).

Decentralized Exchanges (DEXs) - The Reporting Blind Spot

Decentralized exchange (DEX) refers to on‑chain protocols like Uniswap, SushiSwap, or PancakeSwap that operate without a custodial broker. Because DEXs are not classified as brokers under IRC§6045, they are exempt from filing Form1099‑DA. That leaves you fully responsible for tracking every swap, liquidity‑provision event, and token receipt.

How to stay compliant:

1. Connect your wallet address to a block‑explorer API (Etherscan, BscScan) and export transaction logs.
2. Identify each swap as a taxable disposal; the received token becomes a new acquisition with FMV equal to the USD value of the token you gave up.
3. If you provided liquidity, treat the LP token receipt as a sale of the underlying assets at the moment of deposit, then track the LP token’s disposal when you withdraw.

Many crypto‑tax tools now support DEX imports, but you should double‑check the numbers, especially for concentrated‑liquidity positions on Uniswapv3.

Common Pitfalls and Pro Tips

• Double‑counting transfers: Moving crypto between two accounts on the same exchange can generate two 1099‑DAs (one as a sale, one as a purchase). Reconcile by subtracting the “cost basis’’ you already reported.
• Missing small trades: The IRS can audit based on aggregate totals. Even trades under $600 must be reported if they generate a gain.
• Failing to report DeFi rewards: Safe harbor (Rev. Proc.2025‑18) allows reasonable‑basis methods, but you still need to disclose the income.
• Using the wrong tax year: The 2025 filing covers calendar‑year 2024 activity. If you earned crypto in early 2025, wait until the 2026 return.

Professional help isn’t optional for most. A 2025 survey from the National Association of Enrolled Agents found 63% of taxpayers paid $285‑$1,200 for crypto‑tax assistance. If your transaction count exceeds 200, budgeting for a CPA can save you time and avoid costly errors.

Step‑by‑Step Filing Checklist for 2025

1. Gather all 1099‑DA forms from centralized exchanges.
2. Export full transaction histories (CSV, JSON) from every platform, including DEX wallets.
3. Calculate cost basis using FIFO (or specific ID if documented).
4. Separate ordinary‑income events (mining, staking, airdrops) and fill Schedule1.
5. Populate Form8949 with each disposal, noting holding period and gain/loss.
6. Transfer totals from Form8949 to ScheduleD.
7. Review for accuracy, then e‑file using tax software that supports crypto (TurboTaxCrypto, TaxAct, etc.).
8. Keep all supporting documents for at least seven years in case of an audit.

Future Outlook

Looking ahead, cost‑basis reporting will become mandatory for all brokers in 2026, and the proposed Digital Asset Reporting Compliance Act may bring DEXs under the 1099‑DA umbrella. For now, the safest approach is meticulous record‑keeping and leveraging reputable tax software. By staying organized, you’ll avoid the 217% jump in audit letters that IRS data showed for Q12025.