Crypto Tax Myths in the USA: What You Should Stop Believing in 2025

Introduction

2025 is still aconfusing time for crypto taxes in the United States. The IRS has amended itsguidance in the last few years, yet misinformation and the “advice” of socialmedia continue to perpetuate inaccuracies about what does and does not need tobe reported. This misinformation can cause headaches for many investors, butfor some, it is a lot more than just annoying. Thinking incorrectly can costyou a lot of money on your taxes, or on the other end of the spectrum, it canleave you underreporting your income or exposed to an audit with subsequentpenalties you never account for.

Crypto is complex forsure, but taxes do not need to be. In this blog, we’re going to look at some ofthe most common crypto tax myths that just will not die and provide anunderstanding of how crypto tax works in 2025, together with explaining howKryptos.io removes the problem and seamlessly keeps track and reportseverything you do across wallets, exchanges, and DeFi.

Let’s get to thebottom of this. Here are the crypto tax myths 2025 you need to stop believingright now.

Myth#1: Crypto is anonymous and the IRS cannot track me.

This myth wasestablished in the early days of Bitcoin and crypto, when it was considered, anuntraceable digital currency used behind the shadows. Several investorscontinue to believe that if a cryptowallet does not contain their name, the IRS will never be able to findthem.

The truth as we sit in2025 could not be more different. The IRS has spent substantial resources andengaged in several Washington think tank sessions into blockchain analyticstechnology, and most major exchanges, including Coinbase, Kraken, and Gemini,are mandated to issue a 1099 to customers and the IRS. We no longer live in aworld where your activity is pure, or unreasonable. In fact, the IRS hasalready been involved in multiple cases in the United States where blockchainforensics have resulted in identified undeclared holdings.

Where Kryptos helps:Kryptos collects and accesses all your data from exchanges and wallets intoyour dashboard. Instead of wondering if the IRS can see your activity, you willhave a comprehensive, accurate reporting record to submit confidently.

Myth#2: 'I will only owe taxes when I convert to US dollars.’

This one has caughtmany investors off guard. It makes sense - why would you owe anything for asituation where you haven't 'touched' dollars? But remember the IRS considersevery 'disposal' of crypto to be a taxable event.

Thus, if you tradeEthereum for Bitcoin, buy an NFT withETH, or spend crypto on a coffee - that is a taxable event where you realizedgain. If you made a gain in value from the time you acquired the crypto - youowe tax on that gain - whether you converted to fiat.

Where Kryptos comes in: Kryptos automatically tracksall your disposals fly across wallets and chains, calculating gains and lossesfor every trade. So, you never have to worry about if or when taxes are due.

Myth#3: "You are not taxed on staking or mining rewards until you sell."

Many investors thinkthat rewards generated from staking, mining, or yield farming are"locked" until they are cashed out. Not true according to IRS rules.In general, rewards are treated as ordinary income at their fair market value(FMV) the instant you receive them.

For example, if youmined 0.1 BTC in June, even if you hold it five years before you sell it, youmust report the dollar value of that BTC in June. Although the high profileJarrett case challenged it, the IRS’s position is clear: All staking and miningincome is immediately taxable.

Where Kryptos can help: Kryptos logs the fair marketvalue of every staking, mining, and reward event the second it appears in yourwallet. You will have a clean voluntary IRS record that will not require you totrack prices on your own.

Myth#4: "Small transactions under $600 do not count."

This myth arisesbecause of a miscommunication about reporting thresholds for 1099's. Peoplebelieve if the transaction is less than $600, it does not have to be reported.Unfortunately, that is not how tax law works.

The truth is, taxableevents are reportable - whether they are a penny or a million dollars. If youbought a $5 coffee with Bitcoin, you technically disposed of Bitcoin, and theIRS expects you to report that transaction. The $600 threshold is only applicableto third party forms and does not relate to your obligation as a taxpayer. Thisis one of the most dangerous cryptotaxable events myth investors keep falling for.

Where Kryptos helps: Kryptos captures everytransaction, even micro-payments, meaning you will never underreport an amountjust because it was small.

Myth#5: "I can ignore the reporting of DeFi, NFTs, or offshoreexchanges."

As crypto continues tochange, the myths are changing too. Some people think they can skip reportingdecentralized platforms or foreign exchanges and not worry about it or the IRS.Assuming this in 2025 is risky.

The IRS has made itabundantly clear that DeFi activity, NFTs, and foreign exchange accounts areall taxable and must be reported. Yield farming, swapping coins or tokens on aDEX (decentralized exchange), or minting NFTs are all creating taxable events toreport. The IRS has even ramped up scrutiny of offshore exchanges as they haveactively been looking to share information with foreign accounts.

For instance, if youbought an NFT, using ETH, that is a taxable disposal of ETH. When you stakedtokens on a DEX, the staking rewards are taxable income/benefit. Your tokensare not protected due to decentralization. This has become one of the biggest NFTtax myth USA mistakes people are still making.

Where Kryptos fits in:Kryptos works seamlessly across centralized exchanges, decentralized platforms,wallets, and even keeps track of NFTs and DeFi transactions. Everything istracked automatically, which gives you more visibility, and will also keep youcompliant.

Myth#6: “Losses don’t count until I stop trading.”

Many traders like toonly report their gains and forget about their losses, assuming they only countwhen they close all trading activities down. That’s an expensive assumption tomake.

The truth: you can(and should) claim capital losses every year. Your capital losses can offsetcapital gains, and if your losses exceed your gains, you can deduct up to$3,000 per year against your ordinary income, carrying forward the excesslosses. Not aware of the losses you are taking could mean you're paying moretax than is necessary.

Where Kryptos helps: Kryptos calculates realized gains andlosses automatically across multiple wallets and exchanges, so you know exactlywhat you can claim every year, saving you money and overpayment.

Myth#7: "Spreadsheets or generic software are fine for crypto reporting."

Sure, usingspreadsheets or traditional tax tools may look easy, in terms of set up, butcryptocurrency trading is anything but simple. Multi-chain swaps, NFTs, stakingand DeFi positions create thousands of micro-transactions varying in value.Spreadsheets and other generic accounting tools are not built to manage thislevel of complexity - and there is too much risk of an audit mistake costingyou thousands.

Where Kryptos comesin: Kryptos was purpose-built for crypto, no matter how broken attitude toyield, staking, protocol you might have. It handles everything from NFTs toDeFi pools while automatically syncing across chains and wallets. And you cancreate IRS-ready reports that are accurate, compliant and audit-proof inminutes!

Conclusion

The IRS crypto taxmyths of 2025 are not only misleading - they could be dangerous. If you believein obsolete advice about anonymity, thinking you will only be taxed on fiat,and ignoring decentralized finance (DeFi), you could expose yourself to penalties,audits, or just overpaying your tax bill. The crypto tax USA rules are stricter than ever. The IRS hasbecome sharper, smarter, and more aggressive in monitoring your cryptoactivity. Compliance with tax obligations is no longer optional - it isessential.

But the good news isthat you don't have to traverse this tangled web of tax compliance all byyourself. Kryptos.io is built for the complexities of modern crypto. Whetheryou transact on multiple crypto exchanges, engage with DeFi,collect NFTs, or earn staking rewards, Kryptos.io collects everything in onespot, automatically calculates your tax obligations, and provides the reportingassurance you need.

Quit believing themyths. Start reporting smart - with Kryptos.io.

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