USA Crypto Tax Guide 2025

USA Crypto Tax Guide 2025

A comprehensive guide to crypto tax regulations in the USA, covering taxable crypto transactions, capital gains, income tax, and exemptions.

Tax authorities in the USA consider crypto a form of property, not a currency according to Notice 2014-21, and any transactions made using crypto assets entail tax liabilities.

Depending on the nature of your transactions, you’ll either pay income tax or capital gains tax in the USA. Crypto assets held for less than a year attract short-term capital gains tax with tax rates ranging between 10-37%, while those held for over a year attract long-term capital gains tax which is either 15% or 20% depending on the value of your gains.

The following transactions are considered taxable by the tax authorities:

• Selling cryptocurrency for fiat currency
• Trading one cryptocurrency for another
• Using cryptocurrency to purchase goods or services
• Earning cryptocurrency as income
• Receiving cryptocurrency through mining or staking activities
• Giving cryptocurrency as a gift or donation (subject to gift     tax rules)
• Inheriting cryptocurrency (subject to state tax rules)

If you’re involved in any of these transactions, you must report them to the IRS and file your taxes by April 15,2026.

This guide covers all types of crypto transactions that entail tax liabilities such as mining, staking, or trading crypto assets. It also answers some crucial questions like “How do I calculate my income or capital gains?”,  “Are there any tax-free crypto transactions?”, and “How can Ipay fewer taxes on my crypto gains/income?” to help resolve all your crypto-tax-related queries.

How is Crypto Taxed in the USA?

Crypto transactions broadly fall into two categories in the USA, the first one attracts income tax while the other attracts capital gains tax. Transactions where crypto assets are received as a result of provisioning service or as interest usually attract income tax, while those where crypto assets are acquired and then sold on a later date for a profit attract capital gains tax.

Capital Gains Tax

There’s both short-term and long-term capital gains tax in the US, so if you’re selling your assets within less than a year of acquisition then the transaction would attract short-term capital gains tax, and if you’ve held it for over a year then it would attract long-term capital gains tax.

Note that if your gains are less than $48,350(for the 2025 tax year), you don’t have to pay any long-term capital gains tax.

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Example:

Consider the following transactions:

• 01/13/2025 - Jack bought 2 BTC in theBinance Wallet
• 02/15/2025 - Jack bought 2 ETH tokens inthe Binance Wallet
• 04/16/2025 - Jack sold 1 BTC from theBinance Wallet
• 06/04/2025 - Jack sold 2 ETH from BinanceWallet
• 01/16/2025 - Jack sold 1 BTC from theBinance Wallet

As evident from the above ledger oftransactions, three disposals were made.

Out of the three disposals, two were short-termdisposals made within a year, and one was a long-term disposal.

1st Disposal

1 BTC sold on 04/16/2025

Let’s assume Jack incurred a capital gainof $8,000 on this transaction, for the sake of simplicity

2nd Disposal

2 ETH sold on 06/04/2025

Let’s assume Jack incurred a capital gainof $2,000.

Collective Gain from both disposals = $8,000 + $2,000 = $10,000

So the above amount will be subjected toshort-term capital gains tax.

3rd Disposal

1 BTC sold on 01/16/2025

Let’s assume Jack made a capital gain of$14,000 on this transaction.

However since the disposal was made afterholding the asset for over a year, it comes under long-term capital gain.

And since the gain is less than $48,350,Jack owes no long-term capital tax to the IRS.

Listed below are the tax rates applicableon both short-term and long-term capital gains transactions.

Short-Term Capital Gains Tax Rate

These tax rates are for the 2025 tax year, to be filed in 2026

For the 2026 tax year, to be filed in 2027.

Long-Term Capital Gains Tax Rate

You can refer to the long-term Capital Gains Taxrates for the 2025 tax year (to be filled in 2026) listed below.

For tax year 2026, to be filed in 2027.

Crypto Income Tax

There are many ways you can earn cryptoincome and some of the most common ones include:

• Receiving crypto as airdrop
• Getting paid in crypto in exchange for a product or a service
• Mining crypto as a hobby
• Hard forks
• Referral programs
• Staking rewards

Moreover, any income derived from staking,lending, or liquidity farming on Defi protocols or engaging with Play2Earnplatforms is also categorised as income and hence subject to the regular incometax rules. 

Income Tax Rates

Following are the income tax rates in the USA for the 2025 tax year.

Note that any attempts you make tounderreport your assets and evade some taxes may end up with severe penaltiesas the IRS can track crypto transactions through the following avenues:

• KYC requirements in the US mandate crypto exchanges to share     customer data with authorities
• Exchanges track user wallets, and bank transactions and report     them to the IRS.
• All major exchanges send Form 1099 to the IRS

Classification of Crypto for Tax Purposes

Back in 2014, the IRS issued Notice 2014-21which states that crypto assets are to be treated as ‘property’ from a taxperspective. The IRS defines cryptocurrency as:

“...a digital representation of value thatfunctions as a medium of exchange, a unit of account, and a store of valueother than a representation of the United States dollar or a foreign currency.”

Therefore, any transactions involving thepurchase and sale of such assets would be capital in nature and hence attractcapital gains tax. Moreover, these assets are taxable as income when receivedas compensation for a product or service, or as interest.

How to Calculate Crypto Income in the USA?

Calculating income from crypto transactions is fairly straightforward, the taxable value of crypto assets received as income is simply their fair market value on receipt.

The real problem lies in calculating capital gains. Since most investors buy multiple assets of the same kind, they usually end up in a stir when it’s time to calculate the capital gains upon disposal.

That’s exactly why one must rely on dedicated accounting methods as specified by the tax authorities for capital gains calculations.

The IRS permits the use of three accountingmethods namely FIFO, HIFO, and LIFO. Let’s discuss them in a bit more detail.

FIFO

FIFO or First-In-First-Out is one of themost commonly used accounting methods. It states that the first asset you buyis the first one you sell.

LIFO

LIFO or Last-In-First-Out states that thelast asset you buy is the first one you sell.

HIFO

HIFO or Highest-In-First-Out simply considers the highest acquisition price of an asset to be the cost basis.

Here’s an example to better understandcapital gains calculations.

Consider the following transactions:

01/14/2025 - Mark buys 2 BTC for $20,000each in Binance Wallet

03/16/2025 - Mark buys 1 BTC for $21,000in Binance Wallet

04/05/2025 - Mark buys 10 ETH for $2,200each in Binance Wallet

04/28/2025 - Mark buys 2 ETH for $3,000each in Binance Wallet

05/06/2025 - Mark sells 2 BTC for$34,000 each from Binance Wallet

07/16/2025 - Mark sells 1 BTC for$35,000 from Binance Wallet

08/18/2025 -Mark sells 8 ETH for $3,400 each from Binance Wallet            

As evident from the above ledger oftransactions, Mark made 3 disposals.

Let’s look at each transaction separatelyand calculate the gains/losses associated with them.

1st Disposal

2 BTC sold for $34,000 each

Now since BTC tokens were acquired on twodifferent dates for different prices, we need to figure out which one was soldby Jack, and we need to use a specialised accounting method as suggested by theIRS.

We will be using FIFO for thesecalculations.

The FIFO accounting method assumes that thefirst asset you buy is the first one you sell.

So the BTC tokens sold were the onesacquired on 01/14/2025 for $20,000 each.

Cost Basis = $20,000
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Disposal Amount = $34,000
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Capital Gain/Loss = Disposal Amount - CostBasis = $34,000 - $20,000 = $14,000(For 1 BTC)
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Gain from 2 BTC = 2*14,000 = $28,000

2nd Disposal

1 BTC sold for $34,000

This token was acquired on 03/16/2025 for$21,000

Cost Basis = $21,000

Disposal Amount = $34,000

Capital Gain/Loss = $34,000 - $21,000 =$13,000

3rd Disposal

8 ETH sold for $3,400 each

Now using the FIFO accounting method, thesetokens belong to the same group of tokens acquired on 04/05/2025 for $2,200each.

Cost Basis = $2,200

Disposal Amount = $3,400

Capital Gain/Loss = $3,400 - $2,200 =$1,200(from 1 ETH)

Gain from 8 ETH tokens = 8* 1,200 = $9,600

Collective Gain from all 3 disposals =$28,000 + $13,000 + $9,600 = $50,600

This is your taxable base and capital gainstax will be levied on it.

Wallet-by-Wallet Reporting

The IRS’s wallet-by-wallet reporting requirement, effective January 1, 2025, mandates that taxpayers must track and report cryptocurrency assets based on each wallet or account rather than aggregating all holdings. This means each digital wallet (whether hosted by a broker or an unhosted wallet like a private crypto wallet) must be treated as a separate “account” for tracking the cost basis, acquisition details, and disposition of assets. 

Key Aspects of IRS Wallet-by-Wallet Reporting:

1. Separate Cost Basis Tracking for Each Wallet:

• Each wallet’s digital assets need individual cost-basis     records. Taxpayers must document acquisition dates, purchase prices, and     any adjustments for each asset in each wallet separately.
• This approach eliminates multi-wallet or universal tracking,     where all assets across multiple wallets were previously aggregated for     tax purposes.

2. Specific or Global Basis Allocation:

The IRS allows a safe harbor for basis allocation:

• Specific Unit Allocation: This     option lets taxpayers allocate basis to specific assets by identifying     each unit within a wallet, making the basis tracking detailed at an     individual asset level.
• Global Allocation: Alternatively,     a taxpayer may apply a set rule (e.g., highest-cost basis first) to     allocate the basis within each wallet without individually identifying     each asset.

3. Required for Both Brokered andUnhosted Wallets:

• For broker-hosted wallets (like those held on exchanges),     specific identification can occur through broker records.
• For unhosted wallets, taxpayers must maintain their detailed     records to meet IRS requirements.

4. Compliance on Transactions and Sales:

• When a taxpayer disposes of assets (sells, transfers, or     exchanges), they must specify the units and associated basis per wallet.
• Each wallet’s transactions are reported individually, which     aligns with IRS requirements to track and report gains and losses on a     wallet-specific basis.

Transitioning of existing digital assetson 1st January 2025

The document issued by the IRS provides aframework for transitioning from a universal or multi-wallet tracking approachto wallet-by-wallet tracking in line with the new IRS regulations effectiveJanuary 1, 2025 (essentially, this will be applicable for returns filed in 2026for tax year 2025. However, the taxpayers need to allocate the cost basis bythe end of tax year 2025). As per the said documents, the transition shall bedone in the following manner:

1. Identify Digital Assets and Basis:

• Confirm which digital asset units are still held by the     taxpayer as of January 1, 2025, and designate these as "remaining     digital asset units."
•  Separate units of unused basis (the original per-unit     basis of assets still held) from any basis previously identified and used.

2. Maintain Comprehensive Records:

• Records must document each wallet's digital assets, including     the number of units, unused basis, original acquisition cost, and dates of     acquisition.
• This ensures the specific identification of assets within each     wallet is possible, supporting compliance with wallet-by-wallet tracking     requirements.

3. Allocation of Basis (Safe Harbor Option):

• The IRS allows taxpayers to make a "reasonable     allocation" of unused basis to each wallet. There are two option:
   
  • Specific Unit Allocation: Allocate      specific units of unused basis to individual remaining assets based on      characteristics like acquisition date or cost.
   
  • Global Allocation: Use an      ordering rule (e.g., prioritizing highest or earliest basis) to allocate      basis to each wallet or account pool.

4. Complete Allocations by Relevant Deadlines:

• Specific unit allocations must be completed by the date of the     first asset sale or transfer after January 1, 2025, or by the federal     income tax filing due date for 2025.
• Global allocations must be described in records before January     1, 2025, and completed according to prescribed rules for wallet or account     pools.

5. Ensure Irrevocability:

• Any allocation made under this procedure is irrevocable,     securing consistency in reporting and compliance with IRS standards going     forward.

Requirements for new assets:

In case of assets acquired after 1st January2025 monitor new acquisitions and basis adjustments.

• Any assets acquired or transferred into a wallet after January     1, 2025, should be tracked and reported separately within that specific     wallet.
• Reconcile new units with existing wallet records, ensuring any     basis adjustments align with IRS wallet-by-wallet reporting.

https://www.irs.gov/pub/irs-drop/rp-24-28.pdf

Crypto Tax Exemptions in the USA

While the tax regime in the US isconsidered to be a little rough by crypto investors and traders, there are sometax-free allowances offered by the IRS that can help you reduce your tax billsignificantly:

Although investors consider the IRS to beone of the thorough and austere tax authorities in terms of crypto taxregulations, it does offer some tax exemptions for investors to lower their taxbill.

Capital Gains Tax-Free Allowance:     US citizens are allowed a capital gains tax-free allowance. In 2025, if your taxable income is $48,350 or less for single filers or $96,700 or     less for married couples filing jointly, you could potentially be eligible     to benefit from a 0% long-term capital gains rate.

Gifting Crypto: US citizens are     also offered an annual gift tax exclusion which allows every citizen to     give up to $19,000 worth of crypto assets to anyone and the transaction is     considered tax-free.

Long-Term Capital Gains Tax Rate: By holding onto your crypto assets for over ayear, you can take advantage of a reduced long-term capital gains tax rateranging between 0 and 20%.

Treatment of Crypto Losses

Investors were allowed to deduct losses they might’ve made due to theft or fraud before the Tax Cuts and Jobs Act was passed. This legislation states that investors can no longer use lost or stolen assets as deductible expenses. So any losses you might’ve made due to scams, chain hacks, phishing attacks, or losing the private keys to the wallet are now useless.

But here’s the caveat, any losses incurred in or before 2017 are tax deductible if you have relevant documents to prove ownership and theft of these assets.

If you own tokens that have been delisted from exchanges due to regulatory changes and guidelines, you can dispose of these assets to generate fictitious losses and deduct these losses to lower your tax bill.

You can do that by selling these tokens at a centralised or decentralised exchange, swapping them for some other token, or simply burning them.

United States: Tax Treatment of CryptoLosses

The Celsius Network bankruptcy marked a significant fallout in the cryptocurrency industry, exposing vulnerabilities in centralized exchanges. Declared in mid-2022 amid liquidity challenges, it left thousands of investors unable to access their funds. The collapse revealed operational mismanagement and risky lending practices. Bankruptcy proceedings aim to redistribute approximately $2 billion in assets, though many users face substantial losses. The legal and tax implications of the distributions received during the bankruptcy vary depending on the country. 

Below is a detailed analysis of how theUnited States (US) handle these issues.

In the US, the tax implications ofCelsius-related events vary based on whether the cryptocurrency was liquidated during the bankruptcy process.

• Taxable and Non-Taxable Events
  
  • Liquidation of holdings constitutes a taxable disposal, with capital gains or losses calculated based on the change in value since acquisition.
  • Receiving the same cryptocurrency in reduced quantity without      liquidation is not a taxable event​.
 
• Deduction of Crypto Losses
  
  • Losses from liquidated investments may be claimed to offset capital gains. If classified as a casualty loss, the deduction is deferred until 2026.
  • Losses exceeding $3,000 annually can be carried forward.
 
• Margin Calls and Staking Rewards
  
   
  • Liquidation due to margin calls triggers a taxable event.
  • Staking rewards that cannot be withdrawn may not be      immediately taxable​.

Example

Voyager refunded 30% of crypto holdings as USD

Tax applies to liquidated funds, not to reduced same-asset    distributions.

Taxation of Specific Crypto Activities

Now that we have a good grip on how cryptotaxes work and how to calculate them. Let’s look at how specific cryptotransactions are taxed.

Mining Taxes

Crypto assets received as a result ofmining are taxed as income based on their fair market value at the time ofreceipt. Furthermore, if you decide to sell these assets for a higher price ata later date, then you’ll be liable to pay capital gains tax on the gains.

Staking Taxes

The IRS has specified in the past that anyassets received as a result of staking crypto assets would attract income tax.However, some investors argue against it while suggesting that staking rewards,like newly created tokens, should be taxed upon disposal and not on receipt.

To clarify this situation, the IRS issuedNotice 2025-14 which clearly states that staking rewards are taxable as income,dismissing any doubts regarding the same. However, there are no clearguidelines around the taxation and deductibility of additional expenses like“gas fees” and the calculation of staking rewards for income tax purposes.Therefore, one must seek advice from experienced tax consultants to gain moreclarity on the subject.

Airdrops and Forks

Soft forks do not constitute a taxableevent since no new tokens are created, Soft forks, on the other hand, attracttax liabilities. Any new tokens received due to a chain split are taxed asregular income and these tokens inherit the tax base equal to the fair marketvalue of these tokens on receipt. 

Staking rewards also attract capital gainstax on disposal.

Crypto Gifts and Donations Taxes

Gifting crypto is a taxable event in theUS. However, there’s a personal gift exemption limit of $19,000 for the 2025tax season. If the total value of the gifted assets is more than $19,000, theninvestors are required to pay a 40% tax.

But here’s the catch, gifts over $19,000 areonly taxable when you surpass the lifetime gift exemption limit of $13.99million. Note that receiving crypto gifts isn’t taxable and the gifted assetssimply inherit the cost base equal to the fair market value of the assets atthe time they were gifted. So that you attract capital gains tax when youdecide to dispose of these assets for a profit.

Any donation made to a registered charityin the US is tax-deductible given that the organisation you’re donating to hasa 501(c)3 status with the IRS. Here’s a list of all charitable organisationshaving 501(c)3 status with the IRS.

DeFi Transactions

The IRS has yet to declare clear guidelineson the nature of DeFi transactions and how they are viewed from the taxperspective. Since DeFi is a new landscape and is still evolving, making spacefor new avenues of earnings for people across the globe, there’s no way toaccommodate all DeFi transactions and the returns offered by them into a set oftax guidelines.

However, it’s important to note that youmight attract tax liabilities if you appear to be making an income or capitalgain from DeFi transactions. Given below are some DeFi transactions that canattract tax liabilities from the IRS

• Earning liquidity tokens or new tokens from DeFi protocols
• Taking a loan against collateral from DeFi protocols or private     lenders
• Staking, yield farming, and adding or removing liquidity from     liquidity pools
• Gains made from DeFi margin trades
• Paying interest in crypto for loans sourced from DeFi     protocols, which in some cases may be considered as a disposal of crypto     assets and hence attracts capital gains tax.

ICOs and Token Sales

ICOs are special events that allowinvestors to acquire tokens from unreleased projects in exchange for mainstreamtokens like BTC and ETH. ICOs are similar to IPOs in traditional markets andare viewed as crypto-to-crypto trades for tax purposes across jurisdictions.

The IRS has yet to release guidelines onthe taxation of ICOs. We suggest seeking guidance from an experienced taxprofessional on the matter to avoid complications with the IRS. Relevantdetails regarding ICO taxation will be added here as soon as the guidelines hitour radar.

Crypto Lending and Borrowing

Borrowing crypto assets doesn’t constitutea taxable event. But if you lend your crypto assets to an individual, exchange,or a Defi protocol in exchange for interest, then the event will attract incometax.

NFT and DAO 

According to the section titled “DigitalAssets” on the 16th page of the new tax guidelines report:

“Digital assets are any digitalrepresentations of value that are recorded on a cryptographically secureddistributed ledger or any similar technology. For example, digital assetsinclude non-fungible tokens (NFTs) and virtual currencies, such as cryptocurrenciesand stablecoins.”

This makes it pretty evident that theInternal Revenue Service (IRS) considers NFTs to be a form of property, similarto cryptocurrencies. In other words, disposing of digital assets, such asthrough a sale or exchange, may result in tax obligations, just like with anyother type of property. This is because such transactions may result in capitalgains or losses that must be reported to the IRS.

The recent mandate has provided a clearerunderstanding of NFTs and established a more defined framework for theirtaxation. The tax rate for NFTs is not fixed and may vary based on factors likemode of purchase, duration held, and amount of gains or losses incurred upondisposal.

To determine the amount of taxes owed tothe IRS, you will need to itemise all of your NFT transactions on form 8949 andthen use the standard deduction chart at the end of the form to calculate thetax due.

You can refer to the complete NFT tax guidehere.

The IRS is yet to release specific guidance onhow income from DAOs is taxed. However, DAOs aren’t registered organisationsand can’t file taxes independently, they’re closer to flow-throughorganisations. Therefore, it's safe to assume that any income from DAOs will besubjected to income tax, and any gains incurred on the disposal of tokensreceived from DAOs will be taxed as a capital gain.

Crypto Margin Trading, Futures and CFDs

For individual investors, the tax treatmentof margin trades, crypto futures, and CFDs is similar to other cryptotransactions that incur capital gains tax. Any profits derived from thesefinancial instruments are classified as capital gains and are subject tocapital gains tax. Just like the disposal of assets, tax liabilities arise onlyupon the closure of a margin trade, future, or CFD position.

Regarding crypto futures, trading regulatedproducts can lead to more advantageous tax outcomes, particularly due to theIRS 60/40 rule. Essentially, this rule stipulates that if investors engage inregulated futures trading, 60% of any capital gains will be taxed as long-termgains, while the remaining 40% will be taxed as short-term gains, regardless ofthe duration of the position. However, it's important to note that most cryptofutures are currently unregulated and therefore exempt from this rule.

How to Avoid Paying Tax on Cryptocurrency in the US?

To make things clear, there’s no legal wayto avoid paying taxes on crypto entirely in the US and any attempt at doing sowill be met with regulatory and legal repercussions from the feds. However,there are ways you can avoid paying taxes on a portion of your gains and hereare some of them:

1. Buy and HODL Crypto Assets

As mentioned above, buying crypto assetsand holding them is not a taxable event in the US. An individual attracts taxliabilities only when he/she disposes of his/her assets and makes a capitalgain as a result.

2. Utilise Tax Deductions

The IRS offers several exemptions that cansignificantly lower your tax bill, therefore it’s advisable to utilise your taxdeductions like tax-free capital gain allowance, and the gifting allowance toreduce your taxable base.

3. Actively Track Your Losses and Harvest Them

You can close some of your dud positions oreven potentially good ones at a loss and use them as an anchor to bring downyour net capital gains and hence save thousands of dollars in capital gainstaxes. The wash-sale rule for tax-loss harvesting is only applicable forsecurities at the moment and therefore, you can sell your assets to create afictitious loss and then buy the same assets right after.

4. Gift and Donate Crypto

Gifting and donating crypto are consideredtax deductibles by the IRS and can be used to bring down your tax bill,however, make sure the total amount of crypto gifted should not exceed $19,000 and the donations made are towards a registered charity and aren’t directly orindirectly linked to you in any way.

5. Invest in IRAs and OZFs

Invest in tax-advantaged investment funds tocompound your returns and plan for the future. Alternatively, contribute to an OpportunityZone Fund (OZF)[LK1] to support public good initiatives whilepotentially benefiting financially.

Reporting Requirements, Compliances and Deadlines

Typically, in the US, you must report yourcryptocurrency taxes by April 15th, which coincides with the deadline forfiling individual income tax returns. However, if April 15th falls on a weekendor holiday, you may be granted an extension to the next business day.

How to File Crypto Taxes in the US

You can file your crypto taxes online oroffline. If you decide to go the traditional way and use paper forms to fileyour taxes with the IRS, follow these steps to make sure everything goessmoothly:

• First download Form 8949 and use it to report all your crypto     disposals within a tax year.
• Use Schedule D on Form 8949 to report all your capital gains     and losses
• If you receive crypto income from sources such as airdrops,     forks, liquidity pools, or bonuses, you'll need to fill out Schedule 1.     However, if you happen to be self-employed or operate a crypto-based     business and earn crypto income, you should utilise Schedule C instead.
• Once all of this is done, complete your tax return using Form     1040 and add all other tax forms with it before you file it with the IRS.

If you choose to go the modern route,there are several ways to file taxes online:

• You can use an online crypto tax platform like Kryptos that can     guide you through the process step-by-step, help you find deductions and     credits, and e-file your tax return directly with the IRS.
• If you meet certain income requirements, you can use the IRS     Free File program to file your taxes online for free. The program partners     with various tax preparation companies to offer free filing options to     eligible taxpayers.
• Many tax professionals offer online tax filing services through     their websites. These services typically involve uploading your tax     documents to a secure portal and allowing the tax professional to prepare     and file your return on your behalf.

What Crypto Records Will the IRS Want?

The IRS requires taxpayers to maintainadequate records to support the positions taken on their tax returns. To meetthis requirement, it is essential to keep records of all crypto transactions,including:

• The market value of your assets on the day of acquisition
• The market value of your assets on the day of disposal
• A detailed record of all your gains and losses
• Date and time of your transactions
• Receipt of all sales and purchases
• Record all transfers made between your personal and external     wallets

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Reporting requirements for brokers

IRS regulations introduce severalcompliance requirements for taxpayers, brokers, and certain intermediarieshandling digital assets. With effect from January 1, 2025, here are the maincompliance obligations outlined:

 1. Reporting by Brokers on Form1099-DA

• Gross Proceeds Reporting: Brokers     must report the gross proceeds from digital asset transactions beginning     with transactions conducted on or after January 1, 2025.
• Basis Reporting: Starting     January 1, 2026, brokers are required to report the cost basis for     specific transactions to help taxpayers determine gains and losses     accurately.
• Special Cases:        
   
  • Real estate brokers involved in transactions where digital      assets are part of the payment must report the fair market value of      digital assets received by sellers on or after January 1, 2026.
   
  • Sales of stablecoins and NFTs exceeding de minimis thresholds      can be reported in aggregate.

 2. Scope of Applicability

• These rules apply to brokers, custodial platforms, certain     hosted wallet providers, and digital asset payment processors (PDAPs) that     handle asset transactions for customers.
• Exemptions: Decentralized or     non-custodial brokers who do not hold custody of assets are currently     exempt. However, further guidance for these brokers is expected.

 3. Penalty Relief (Notice 2025-56)

• For transactions in 2025, the IRS will not impose penalties for     late or incorrect Form 1099-DA filings if brokers make a good-faith effort     to comply.
• Relief from backup withholding requirements and penalties is     also available in 2025 and 2026 for brokers who follow TIN-matching     procedures or specific withholding protocols.

 4. Temporary Exceptions toReporting (Notice 2025-57)

• Certain digital asset transactions, such as     wrapping/unwrapping, liquidity provision, staking, lending, short sales,     and notional principal contracts, are temporarily exempt from reporting on     Form 1099-DA. This relief will continue until the Treasury and IRS provide     further guidance.

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These regulations are aimed at increasingtransparency and simplifying the process for taxpayers to report income fromdigital assets while helping the IRS improve tax compliance for cryptotransactions.

https://www.irs.gov/newsroom/final-regulations-and-related-irs-guidance-for-reporting-by-brokers-on-sales-and-exchanges-of-digital-assets

How to File Crypto Taxes Using Kryptos?

Now that you’re aware of how your cryptotransactions are taxed and what forms you need to fill out to complete your taxreport, here’s a step-wise breakdown of how Kryptos can make this task easierfor you:

• Visit Kryptos and sign up using your email or Google/Apple     Account
• Choose your country, currency, time zone, and accounting method
• Import all your transactions from wallets and crypto exchanges
• Choose your preferred report and click on the generate report     option on the left side of your screen and let Kryptos do all the     accounting.
• Once your Tax report is ready, you can download it in PDF     format.
• Specifically for US investors, we provide extensive reports     that will help in your tax filing;
• We provide automatically filled-up Schedule D, form 8949 and,     form 1040 excerpts;
• You can use these reports and send them to your tax accountant     to complete your tax return (or you can use other tax software and file     your tax return with the help of these reports).

If you still need clarification regardingthe integrations or generating your tax reports, you refer to our video guidehere.

FAQs

1. Do you pay tax on crypto in the US?

Yes, in the United States, cryptocurrencyis treated as property for tax purposes, which means that any gains or lossesfrom buying, selling, or trading cryptocurrency are subject to capital gainstax. The tax rate depends on various factors, such as how long thecryptocurrency was held and the individual's income tax bracket. Additionally,cryptocurrency transactions may trigger other tax requirements, such asreporting requirements for foreign accounts. It's always best to consult with atax professional or accountant to understand your specific tax obligationsrelated to cryptocurrency.

2. Is cryptocurrency legal in the US?

Yes, cryptocurrency is legal in the UnitedStates. Although the government has been engaged in efforts to establishcryptocurrency regulations, there are no federal statutes forbiddingindividuals from engaging in the purchase, sale, or retention of cryptocurrencies.However, it's important to note that the use of cryptocurrency for illegalactivities, such as money laundering or financing terrorism, is illegal and canlead to criminal charges.

3. Do you pay tax when transferringcrypto in the US?

Transferring cryptocurrency from one walletto another wallet or from one exchange to another exchange is generally not ataxable event in the United States. This means that you will not owe taxes onthe transfer itself. However, you may be subject to taxes on the cryptocurrencyif you sell or exchange it for another cryptocurrency or fiat currency.

4. What happens when you don’t reportcrypto in your tax report?

Failure to report cryptocurrency on yourtax return can result in penalties and interest charges from the InternalRevenue Service (IRS). The penalties for not reporting cryptocurrency can varydepending on the specific circumstances of the situation but they can include:

If you fail to file your tax return ontime, the IRS may impose a penalty of 5% of the unpaid tax amount per month, upto a maximum of 25% of the unpaid tax.

• If the IRS determines that you understated your tax liability     due to negligence or disregard of tax rules, they may impose a penalty of     20% of the understated tax liability.
• In case of intentional tax evasion or fraud, you could face     criminal penalties, including fines and imprisoAll content on Kryptos     serves general informational purposes only. It's not intended to replace     any professional advice from licensed accountants, attorneys, or certified     financial and tax professionals. The information is completed to the best     of our knowledge and we at Kryptos do not claim either correctness or     accuracy of the same. Before taking any tax position/stance, you should     always consider seeking independent legal, financial, taxation or other     advice from professionals. Kryptos is not liable for any loss caused by     the use of, or by placing reliance on, the information on this website.     Kryptos disclaims any responsibility for the accuracy or adequacy of any     positions taken by you in your tax returns. Thank you for being part of     our community, and we're excited to con225tinue guiding you on your crypto     journey!