Cryptocurrency Tax Guide:
Complete Resources for Crypto Investors
Expert guidance from a licensed CPA specializing in cryptocurrency taxation. These resources are regularly updated to reflect current IRS rules and enforcement practices.
These cryptocurrency tax guides are updated in response to the latest developments, including the Form 1099-DA reporting requirements now in effect for 2025 transactions and the wallet-by-wallet cost basis tracking rules under Rev. Proc. 2024-28.
What You'll Find Here
Navigating cryptocurrency taxes is complex. The rules are evolving, IRS enforcement is increasing, and mistakes can be expensive. These guides provide the foundational knowledge you need to stay compliant—whether you're a long-term holder, active trader, DeFi participant, or someone who just received their first IRS letter.
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Each guide is written by Gregory Monaco, CPA, who focuses his practice on cryptocurrency tax compliance and has been quoted in Yahoo Finance, Nasdaq, GOBankingRates, and BeInCrypto on digital asset topics.
2025 Crypto Tax Compliance Checklist
Featured Resource: Free 2025 Crypto Tax Compliance Checklist
A CPA-prepared guide covering the new Form 1099-DA reporting requirements, wallet-by-wallet tracking rules under Rev. Proc. 2024-28, the "missing basis" problem, smart loss harvesting strategies, and New Jersey-specific considerations. Download the PDF checklist to prepare before the December 31 deadline.
Key Takeaways for 2025
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In the U.S., cryptocurrency and most digital assets are treated as property for federal tax purposes.
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You may owe tax when you sell, trade, spend, or otherwise dispose of crypto—and when you receive crypto as income (e.g., staking, mining, services).
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Broker reporting is now active: custodial platforms began issuing Form 1099-DA for 2025 dispositions (gross proceeds only). Cost basis reporting begins for 2026 transactions.
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Wallet-by-wallet cost basis tracking is now mandatory under Rev. Proc. 2024-28—universal/global pooling is prohibited starting January 1, 2025.
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Accurate cost basis documentation is critical because brokers report proceeds but may not report your basis—the IRS may assume 100% taxable gain without it.
Introduction to Cryptocurrency Taxes
Cryptocurrency taxes can feel daunting, especially if you're new to digital assets or have only recently started trading. As cryptocurrencies like Bitcoin, Ethereum, and Solana become more mainstream, understanding the tax implications of your crypto transactions is more important than ever.
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The IRS treats cryptocurrency as property under Notice 2014-21, which means that every time you sell, trade, or use crypto, you could be triggering a taxable event. Whether you're a casual investor or an active trader, it's essential to know when you owe taxes, how to report your activity, and why keeping detailed records is critical for accurate cryptocurrency tax reporting.
What is Cryptocurrency and How is it Taxed?
Cryptocurrency is a form of digital or virtual currency that relies on cryptography for security and operates on decentralized networks, such as blockchains. Unlike traditional money, cryptocurrencies are not issued or regulated by any central authority.
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For tax purposes, the IRS classifies virtual currency as property, not as currency. This means that when you buy, sell, or engage in a crypto trade (such as trading one cryptocurrency for another), you may be subject to capital gains tax—just as you would with stocks or real estate. The amount of tax you owe depends on the fair market value of your crypto at the time of each transaction and how long you held the asset.
Cryptocurrency Tax Guides
IRS Crypto Letters Explained: CP2000, Letter 6173, and What to Do
For: Anyone who received mail from the IRS about cryptocurrency
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Understand the difference between CP2000 automated notices, Letter 6173 enforcement actions, and informational Letters 6174/6174-A. Learn response deadlines, documentation requirements, and why IRS calculations often overstate your tax due when cost basis is missing.
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Key topics: CP2000 response deadlines (30 days), Letter 6173 requirements, cost basis documentation, Form 8949 preparation
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Form 1099-DA Explained: How IRS Crypto Tax Reporting Works
For: Anyone using centralized exchanges (Coinbase, Kraken, Gemini, etc.)
Cryptocurrency exchanges began issuing Form 1099-DA for 2025 transactions, reporting gross proceeds from digital asset sales. However, cost basis reporting is phased in—brokers are not required to report cost basis until 2026 transactions. Understand what brokers report, what's missing, and why filing based only on your 1099-DA can dramatically overstate your taxes.
Key topics: Gross proceeds vs. cost basis reporting timeline, covered vs. noncovered assets, DeFi broker rule repeal (April 2025), Notice 2024-56 penalty relief
Crypto Cost Basis and Fair Market Value Guide
For: Anyone whose broker forms show proceeds but no cost basis
Missing cost basis on Form 1099-DA is by design—not an error. Brokers report gross proceeds starting in 2025, but cost basis reporting doesn't begin until 2026 transactions. Learn how to calculate your actual gain, prepare Form 8949, respond to CP2000 notices, and avoid paying tax on phantom profits.
Key topics: FIFO vs. Specific Identification, reconstructing acquisition records, Notice 2025-7 specific identification relief, zero-basis problem
Wallet-by-Wallet Cost Basis Tracking: IRS Requirements
For: Anyone with crypto on multiple wallets or exchanges
Universal cost basis pooling is now prohibited under Rev. Proc. 2024-28, effective January 1, 2025. You can no longer apply specific identification across multiple wallets—basis must be tracked on a wallet-by-wallet, account-by-account basis. Learn the new tracking requirements, how to use the safe harbor for pre-2025 holdings, and how to avoid "orphaned basis" that creates phantom taxable gains.
Key topics: Rev. Proc. 2024-28 requirements, specific identification rules, safe harbor allocation methods, transfer documentation
DeFi Taxes Explained: Staking, Liquidity Pools, Wrapping, and More
For: DeFi users, stakers, liquidity providers, and yield farmers
The DeFi broker reporting rule was repealed in April 2025 via the Congressional Review Act (H.J.Res.25)—meaning non-custodial DeFi platforms won't issue Form 1099-DA. However, your tax obligations are unchanged. You must still self-report all taxable DeFi transactions. Staking rewards are taxable as ordinary income when you gain dominion and control under Rev. Rul. 2023-14.
Key topics: DeFi broker rule repeal scope, staking taxation (Rev. Rul. 2023-14), liquidity pools, wrapping, Notice 2024-57 reporting relief
New Jersey Crypto Taxes: State-Specific Rules
For: New Jersey residents with cryptocurrency
New Jersey taxes all cryptocurrency gains as ordinary income—there is no preferential long-term capital gains rate. The state's "bucket system" prevents capital losses from offsetting wages, and individual capital losses cannot be carried forward. Learn NJ-specific planning strategies.
Key topics: NJ gross income tax treatment, bucket system limitations, no loss carryforward rule, gain harvesting strategy
Airdrop Taxes Explained
For: Anyone who received airdropped tokens
Airdrops are taxable as ordinary income when you obtain dominion and control over the tokens. Under Rev. Rul. 2019-24, the fair market value at receipt becomes both your taxable income and your cost basis for future sales.
Key topics: Rev. Rul. 2019-24, dominion and control timing, fair market value calculation, claimable vs. automatic airdrops
Hard Fork Taxes Explained
For: Anyone who held crypto through a blockchain fork
A hard fork by itself is not a taxable event. Under Rev. Rul. 2019-24, you have taxable income only when you receive new units and gain dominion and control—the ability to sell, transfer, or dispose of them.
Key topics: Rev. Rul. 2019-24, dominion and control timing, fork date vs. access date, cost basis of forked coins
What Makes a Crypto Transaction Taxable?
Taxable Events
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Selling crypto for fiat (dollars, euros, etc.)
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Trading one cryptocurrency for another
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Spending crypto on goods or services
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Receiving crypto as income (mining, staking, airdrops, payment for services)
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Receiving new tokens from a hard fork when you gain access—not the fork itself
Non-Taxable Events
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Buying crypto with fiat (but track your cost basis)
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Transferring between your own wallets
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Donating crypto to a qualified charity (may be tax-deductible; documentation rules apply)
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Holding crypto without selling
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A hard fork by itself—taxable income arises only when you receive and can control new units
Key IRS Forms for Crypto
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Form 8949: Report each crypto sale/trade with dates, proceeds, and cost basis
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Schedule D: Summary of capital gains and losses from Form 8949
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Form 1040: Must answer the digital assets question if you had any crypto transactions
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Schedule 1: Report staking/mining income if not a business
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Schedule C: Report mining income if operating as a business
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Form 1099-DA: Issued by brokers for 2025 transactions (you'll receive this in early 2026)
Important Deadlines
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Tax filing: April 15, 2026 for 2025 returns (or October 15 with extension)
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CP2000 response: 30 days from notice date (60 days if foreign address)
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Letter 6173 response: By date stated on letter (typically 30 days)
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Amended return: Within 3 years of original filing date for refund claims
2025 Regulatory Updates
Form 1099-DA Implementation Timeline
The IRS finalized digital asset broker reporting rules in July 2024 (TD 10000). Here's the phased implementation:
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January 1, 2025: Gross proceeds reporting begins for custodial brokers
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January 1, 2026: Cost basis reporting begins
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January 1, 2026: Real estate transaction reporting for digital asset payments begins
For 2025 transactions, you'll receive Form 1099-DA showing proceeds but likely no cost basis. You must maintain your own basis records.
DeFi Broker Rule Repeal (April 2025)
H.J.Res.25 was signed into law on April 10, 2025, repealing TD 10021 which would have required DeFi platforms to report transactions. This repeal affects broker obligations only—your obligation to report all taxable DeFi transactions is unchanged.
Wallet-by-Wallet Tracking (Rev. Proc. 2024-28)
Starting January 1, 2025, you must track cost basis on a wallet-by-wallet, account-by-account basis. Global/universal pooling across wallets is now prohibited. A safe harbor allows allocation of pre-2025 "unused basis" if properly documented.
Frequently Asked Questions
Do I have to report cryptocurrency on my taxes?
Yes. The IRS requires reporting of all cryptocurrency transactions. You must answer the digital assets question on Form 1040 if you had any crypto activity during the tax year.
What triggers a crypto tax obligation?
Taxable events include selling crypto for fiat, trading one crypto for another, using crypto for purchases, receiving crypto as income, and receiving staking/mining/airdrop rewards when you have dominion and control. Simply buying and holding is not taxable.
How do I calculate cryptocurrency cost basis?
Cost basis equals your purchase price plus transaction fees (including gas fees). Under Rev. Proc. 2024-28, you must track this per wallet starting January 1, 2025. Your taxable gain is proceeds minus cost basis. Use FIFO as default or Specific Identification with proper documentation.
What if I received an IRS letter about cryptocurrency?
Identify the letter type immediately. CP2000 notices require response within 30 days. Letter 6173 requires mandatory response. Do not ignore any IRS correspondence—see the IRS Crypto Letters guide.
Are DeFi transactions taxable?
Yes. Staking rewards are ordinary income under Rev. Rul. 2023-14 when you gain dominion and control. Token swaps are taxable exchanges. The DeFi broker rule was repealed in April 2025, but taxpayers must still self-report all taxable DeFi activity—see the DeFi Taxes guide.
Is a hard fork taxable?
A hard fork by itself is not taxable. Under Rev. Rul. 2019-24, you have taxable income only when you receive new units and gain dominion and control—the ability to sell, transfer, or dispose of them.
Need Professional Help?
These guides provide foundational knowledge, but every tax situation is unique. Complex scenarios involving multiple wallets, years of trading history, DeFi activity, or IRS correspondence often require professional review.
Schedule a Consultation
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Monaco CPA specializes in cryptocurrency tax compliance for clients nationwide. If your situation is complex or you've received IRS correspondence, schedule a consultation to discuss your specific needs.
About the Author
Greg Monaco, CPA is a New Jersey-licensed CPA and the founder of Monaco CPA. He focuses on cryptocurrency tax compliance, IRS correspondence, cost basis reconstruction, and audit defense for clients nationwide. His work has been cited in Yahoo Finance, Nasdaq, GOBankingRates, and BeInCrypto.
Sources and Citations
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Last updated: December 22, 2025