How to File Your Cryptocurrency Taxes in 2025

Filing cryptocurrency taxes can feel overwhelming, but with the right approach, you can ensure compliance while maximizing your deductions. As a licensed Enrolled Agent specializing in crypto taxation, I've helped thousands of investors navigate this complex landscape. Here's everything you need to know for the 2025 tax year.

1. Understanding Taxable Crypto Events

Not every crypto transaction triggers a tax event. The IRS treats cryptocurrency as property, which means you're only taxed when you dispose of it. Here are the most common taxable events:

Taxable transactions include:

• Selling crypto for USD or other fiat currency
• Trading one cryptocurrency for another (BTC for ETH, for example)
• Using crypto to purchase goods or services
• Receiving crypto as payment for work or services
• Earning staking rewards or mining income
• Receiving interest from DeFi lending protocols

Non-taxable transactions:

• Buying crypto with USD
• Transferring crypto between your own wallets
• Holding crypto (no matter how much it appreciates)
• Gifting crypto (under $18,000 per person in 2025)

The key is to track every disposal event, as each one requires calculating your gain or loss.

2. Calculating Your Gains and Losses

For each taxable transaction, you need to determine your cost basis (what you paid) and your proceeds (what you received). The difference is your capital gain or loss.

Short-term vs. Long-term:

• Short-term gains (held ≤ 1 year): Taxed as ordinary income at your marginal tax rate (10-37%)
• Long-term gains (held > 1 year): Taxed at preferential rates (0%, 15%, or 20%)

Cost basis methods: The IRS allows several methods for tracking cost basis, with FIFO (First-In-First-Out) being the default. However, you can also use:

• Specific Identification: Choose which specific coins you're selling (can minimize taxes)
• HIFO: Highest-In-First-Out (minimizes short-term gains)
• LIFO: Last-In-First-Out

Once you choose a method, you must use it consistently. Specific identification gives you the most control but requires meticulous record-keeping.

Example: You bought 1 BTC for $30,000 in January 2024 and sold it for $45,000 in March 2025. You held it for 14 months, so it's a long-term gain of $15,000, taxed at preferential long-term capital gains rates.

3. DeFi, Staking, and NFTs

The newest areas of crypto taxation involve DeFi protocols, staking rewards, and NFTs. Here's what you need to know:

DeFi Taxation:

• Swapping tokens on decentralized exchanges (like Uniswap) is a taxable event
• Providing liquidity creates tax complications when you withdraw
• Yield farming rewards are taxed as ordinary income when received
• Impermanent loss can result in capital losses

Staking Rewards: The IRS generally treats staking rewards as ordinary income at their fair market value when you receive them. When you later sell those rewards, you'll have a separate capital gain or loss event.

NFT Sales: NFTs are treated as collectibles by the IRS, which means:

• Long-term gains may be taxed at a maximum rate of 28% (higher than regular crypto)
• Creating and selling NFTs may count as self-employment income
• Buying NFTs with crypto triggers a taxable disposal of that crypto

4. Common Mistakes to Avoid

Based on my experience preparing thousands of crypto tax returns, here are the most common pitfalls:

1. Not reporting crypto-to-crypto trades: Every time you trade one coin for another, that's a taxable event. This catches many people off guard.

2. Forgetting about airdrops and forks: Free tokens from airdrops and hard forks are taxable as ordinary income at their fair market value when you receive control of them.

3. Missing cost basis information: If you don't know what you paid for crypto, the IRS may assume your cost basis is zero, meaning 100% of your proceeds are taxable.

4. Ignoring small transactions: Even buying coffee with Bitcoin is technically a taxable event. The IRS expects you to report it.

5. Not tracking transfers between wallets and exchanges: While not taxable, failing to track these can make it appear you have unreported sales.

5. Required Forms and Reporting

For the 2025 tax year, you'll need to complete:

Form 1040, Question 7a: Everyone must answer the digital asset question. Answer "Yes" if you engaged in any crypto transactions during the year.

Form 8949: Report each individual crypto transaction with date acquired, date sold, proceeds, cost basis, and gain/loss.

Schedule D: Summarize your total capital gains and losses from Form 8949.

Schedule C (if applicable): Report mining income or if you're paid in crypto for services.

Schedule 1 (if applicable): Report staking rewards, airdrops, and other miscellaneous crypto income.

6. How to Get Started

Here's my recommended process for filing your crypto taxes:

1. Gather all transaction records from every exchange, wallet, and DeFi protocol you used
2. Use crypto tax software (like CoinTracker, Koinly, or TokenTax) to import and calculate your transactions
3. Review the results carefully for any errors or missing transactions
4. Consult with a crypto tax professional if you have complex situations (DeFi, NFTs, large gains)
5. File your return by April 15, 2026, or request an extension

Remember, the IRS is increasingly focused on crypto compliance. They receive transaction data from major exchanges and use blockchain analytics to identify unreported income. It's far better to be proactive and accurate than to face an audit later.

Need Help?

If you're overwhelmed by crypto tax reporting, that's completely normal. The rules are complex and constantly evolving. As a licensed Enrolled Agent specializing in cryptocurrency taxation, I can help you navigate your unique situation, ensure compliance, and identify legal strategies to minimize your tax burden.

Contact us today to schedule a consultation and take the stress out of crypto tax season.