How Cryptocurrency Taxation Works in the USA: 2025 Guide

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So, you’ve bought, sold, or even earned some cryptocurrency this year. Maybe you’re a seasoned trader, a casual investor, or someone who just got paid in crypto for a freelance gig. Whatever your situation, one thing’s for sure: Uncle Sam wants his cut.

Cryptocurrency taxation in the USA can feel confusing, especially with new rules rolling out in 2025. But don’t worry—we’re breaking it all down in plain English. By the end of this guide, you’ll know exactly how crypto is taxed, what new changes are coming, and how to stay compliant (and avoid any nasty surprises from the IRS).

Why Is Crypto Taxed in the USA?

First things first: the IRS treats cryptocurrency as property, not currency. That means every time you buy, sell, trade, or even spend crypto, it could trigger a taxable event. Think of it like selling stocks or real estate—any profit you make is subject to capital gains tax.

And if you earn crypto (through mining, staking, or as payment for work), that’s treated as ordinary income and taxed accordingly.

The Two Main Types of Crypto Taxes

There are two main ways you might owe taxes on your crypto: capital gains tax and income tax.

1. Capital Gains Tax

Capital gains tax applies when you sell, trade, or spend your cryptocurrency and make a profit.

Short-term capital gains: If you hold your crypto for less than a year before selling, any profit is taxed as short-term capital gains. This rate is the same as your ordinary income tax rate, which ranges from 10% to 37% depending on your income level.
Long-term capital gains: If you hold your crypto for more than a year, you’ll pay long-term capital gains tax. This rate is lower, ranging from 0% to 20%, again depending on your income.

For example:

If you bought Bitcoin for $10,000 and sold it for $15,000 after 11 months, you’d owe short-term capital gains tax on the $5,000 profit.
If you held it for 13 months, you’d pay the lower long-term rate.

2. Income Tax

If you earn crypto, you owe income tax on the fair market value at the time you receive it.

This includes:

Getting paid in crypto for work
Earning rewards from staking or mining
Receiving airdrops or referral bonuses

The tax rate here is your ordinary income tax rate, which again ranges from 10% to 37%.

What Counts as a Taxable Event?

Not every crypto transaction is taxable, but most are. Here are the main ones:

Selling crypto for fiat (USD, EUR, etc.)
Trading one crypto for another (even stablecoins!)
Spending crypto on goods or services
Earning crypto as income (mining, staking, airdrops, etc.)

Even transferring crypto between your own wallets isn’t taxable, but you still need to keep records in case you sell or spend it later.

New Crypto Tax Rules in 2025

2025 is a big year for crypto taxation in the USA. Here are the key changes you need to know:

1. Form 1099-DA: The New Crypto Tax Form

Starting January 1, 2025, all U.S. crypto exchanges must track your transactions and report them to the IRS using a new form: Form 1099-DA. This form will detail your gross proceeds from crypto sales and exchanges.

This means the IRS will have a much clearer picture of your crypto activity, so it’s more important than ever to keep accurate records and report everything correctly.

2. Wallet-by-Wallet Accounting

Previously, investors could use a “universal” accounting method to calculate their cost basis across all wallets. But starting in 2025, you’ll need to use a wallet-by-wallet method instead.

This means you’ll have to track the cost basis and holding period for each wallet separately. It’s a bit more work, but it ensures more accurate reporting.

3. DeFi Broker Reporting (For Now, It’s On Hold)

There was talk of requiring decentralized finance (DeFi) platforms to report transactions like centralized exchanges do. But in March 2025, the Senate voted to repeal this rule, at least for now. So, DeFi platforms won’t have to report your transactions—yet.

However, centralized exchanges and brokers still must report your activity on Form 1099-DA.

4. Missouri’s Crypto Tax Break

In some good news for crypto holders, Missouri became the first state to remove capital gains tax on crypto in May 2025. If you live in Missouri, you won’t owe state capital gains tax on crypto profits. But federal taxes still apply.

How to Calculate Your Crypto Taxes

Calculating your crypto taxes can be tricky, especially if you’ve made lots of trades or earned crypto in different ways. Here’s a step-by-step guide:

Step 1: Track All Your Transactions

You’ll need to keep a record of every crypto transaction, including:

Date of purchase/sale
Amount of crypto
Value in USD at the time
Wallet addresses involved

Many crypto tax software tools can help automate this process.

Step 2: Determine Your Cost Basis

Your cost basis is what you paid for the crypto, including fees. When you sell, subtract your cost basis from the sale price to find your gain or loss.

Step 3: Figure Out Your Holding Period

If you held the crypto for less than a year, it’s short-term. More than a year? Long-term.

Step 4: Calculate Your Tax

Multiply your gain by the appropriate tax rate (short-term or long-term) to find your tax liability.

Step 5: Report on Your Tax Return

You’ll report your crypto gains and losses on Form 8949 and Schedule D of your tax return. If you earned crypto as income, report it on Schedule 1 or Schedule C (if self-employed).

Common Crypto Tax Mistakes to Avoid

Even experienced investors can trip up on crypto taxes. Here are some common mistakes to watch out for:

Not reporting small trades: Even if you only made a few dollars, you still need to report it.
Forgetting about airdrops and staking rewards: These are taxable as income.
Mixing up short-term and long-term gains: Make sure you’re using the right tax rate.
Not keeping good records: If you can’t prove your cost basis, the IRS might assume it’s zero, which could mean a much higher tax bill.
Ignoring state taxes: Some states have their own crypto tax rules (like Missouri’s new law).

What Happens If You Don’t Report Crypto Taxes?

The IRS is cracking down on crypto tax evasion. If you don’t report your crypto activity, you could face:

Fines and penalties
Interest on unpaid taxes
Audits
In extreme cases, criminal charges

It’s always better to come clean and catch up on any missed taxes before the IRS comes knocking.

Tips for Staying Compliant

Use crypto tax software: Tools like CoinLedger, Koinly, and TaxBit can help you track transactions and generate tax reports.
Keep detailed records: Save receipts, transaction logs, and wallet statements.
Consult a tax professional: If you’re unsure, a CPA or tax advisor who specializes in crypto can help you stay compliant.
Stay updated: Crypto tax rules are changing fast, so keep an eye on the latest news and guidance from the IRS.

The Future of Crypto Taxation

Crypto taxation is still evolving. While there’s been talk of making crypto tax-free (especially under a Trump administration), nothing is set in stone yet. For now, the existing rules apply, and it’s best to plan accordingly.

We expect more changes in the coming years, especially as crypto becomes more mainstream. But for 2025, the key is to stay informed, keep good records, and report everything accurately.

Final Thoughts

Cryptocurrency taxation in the USA doesn’t have to be scary. By understanding the basics—capital gains, income tax, and the new 2025 rules—you can stay compliant and avoid any unpleasant surprises.

Remember: every crypto transaction could be taxable, so keep track of everything, use the right tools, and don’t hesitate to ask for help if you need it. The IRS is watching, but with a little preparation, you can handle your crypto taxes with confidence.

Got questions about your specific situation? Drop them in the comments or reach out to a tax pro. And if you found this guide helpful, share it with your fellow crypto enthusiasts!

Disclaimer: This article is for informational purposes only and does not constitute tax advice. Always consult a qualified tax professional for guidance on your specific situation.