Bitcoin Taxes 2025: What Matters Now, What Could Matter Later, and Overlooked Planning Ideas
- Gregory Monaco, CPA
- Dec 20, 2025
- 13 min read
Bitcoin taxes in 2025 are top of mind for many U.S. taxpayers as IRS enforcement ramps up and new reporting rules take effect. This guide is for U.S. Bitcoin holders, investors, and anyone who wants a clear understanding of their crypto tax obligations for 2025.
While this post focuses on Bitcoin, many of the tax rules discussed also apply to other digital assets, including altcoins, stablecoins, and NFTs. “Bitcoin taxes,” “cryptocurrency taxes,” and “crypto taxes” are often used interchangeably to describe how the IRS taxes virtual currency and other digital assets.
Bitcoin adoption continues to grow—but tax rules around Bitcoin are becoming more complex, not less. The IRS is increasing its focus on cryptocurrency tax enforcement, with more audits and prosecutions related to underreported crypto income or gains.
Between new IRS reporting requirements, stricter recordkeeping standards, and evolving enforcement priorities, many Bitcoin holders face tax risks that weren’t as common a few years ago.
This post outlines how Bitcoin is currently taxed in the U.S., what has recently changed, and which planning considerations are often overlooked. In addition, new tax considerations are being added for Bitcoin holders in 2025, making it even more important to stay informed. It’s intended as general educational guidance—not advice for your specific situation—and reflects how Bitcoin taxation works as of December 2025.
Key Takeaways for Bitcoin Taxes in 2025
Bitcoin is treated as property for federal tax purposes, not currency.
Most taxable events happen when you dispose of Bitcoin (sell, swap, spend).
Form 1099-DA introduces expanded third-party reporting for digital assets.
Per-wallet / per-account cost basis tracking is now the reality—documentation matters more than ever.
Loss harvesting is still possible, but overly aggressive patterns can raise risk.
Failing to report crypto activity accurately can lead to penalties, interest, and—where facts support it—civil fraud assertions or criminal exposure.
Resources
To learn more about crypto tax topics, reporting requirements, and planning strategies (including state-specific considerations for New Jersey residents), explore our additional resources or contact Monaco CPA.
Frequently Asked Questions: Bitcoin Taxes 2025
What are the biggest changes for Bitcoin taxes in 2025?
Form 1099-DA rollout: Digital asset brokers begin expanded information reporting for certain transactions.
Stricter recordkeeping: Per-wallet and per-account cost basis tracking is now required for many taxpayers as the system transitions away from “universal pooling.”
Thresholds reached trigger new requirements: When specific income or capital gain thresholds are reached, additional tax or reporting requirements—such as Net Investment Income Tax (NIIT) or enhanced IRS reporting—may apply for bitcoin and other crypto transactions in 2025.
DeFi reporting expansion repealed: In April 2025, Congress repealed the DeFi/non-custodial broker reporting expansion under the Congressional Review Act (CRA). This did not repeal the broader 1099-DA framework for custodial brokers/exchanges.
Transition safe harbor: Rev. Proc. 2024-28 provides a transition approach for allocating unused basis as of January 1, 2025. (Rev. Proc. 2024-28 PDF)
How do I report Bitcoin on my 2025 tax return?
Report taxable events: sales, swaps, spending, and crypto income.
Capital gains/losses are typically reported on Form 8949 and Schedule D.
Crypto income (mining, staking, compensation) is generally ordinary income. If you receive crypto as compensation (wages, contractor payments, prizes/awards), it’s generally taxable at FMV when received. How it’s reported depends on the facts (for example, W-2 or 1099 from the payer; and where it lands on your return).
Compare your records to broker reporting (including any 1099 forms you receive) and resolve mismatches.
Introduction to Bitcoin Taxation
Bitcoin taxation continues to evolve as the IRS refines its approach to digital assets. At a high level, the IRS treats Bitcoin as property, which means transactions can trigger capital gains and income events can create ordinary income.
When you sell or exchange Bitcoin, you may owe capital gains tax on profit.
When you receive Bitcoin as payment, mining rewards, staking rewards, or are getting paid in crypto for freelancing, rewards, or bonuses, it’s generally taxable income when you have “dominion and control” (i.e., when you can sell or transfer it).
The fair market value (FMV) at receipt typically becomes your original cost basis moving forward.
There are specific instances—such as staking, mining, or airdrops—where different tax rules or reporting requirements may apply, so it’s important to understand how each scenario is treated for bitcoin taxes 2025.
Accurate crypto tax reporting requires keeping records of transaction dates, amounts, and FMV at the time of each event. Good documentation is also your best defense if the IRS ever asks questions.
What Matters Now for Bitcoin Taxes in 2025
Capital Gains Events
Holding Bitcoin isn’t taxable. Disposing of it usually is.
Selling, swapping, spending, exchanging one cryptocurrency for another, or otherwise disposing of Bitcoin can trigger capital gains or losses that must be reported. Crypto capital gains are generally realized when you dispose of your Bitcoin, even if you never convert to dollars.
Income Events (“Dominion and Control”)
Bitcoin received through mining, compensation, rewards, or staking is generally taxable when you can actually sell or transfer it. The FMV at that time becomes your cost basis going forward.
Note: Facts and circumstances matter—tax treatment can vary depending on whether activity rises to the level of a trade or business. If your crypto activity qualifies as a trade or business, you may also be subject to self-employment taxes, and such income should be reported on Schedule C. In this case, you may be able to deduct certain crypto-related expenses, such as equipment, electricity, or transaction fees, provided you maintain proper documentation and follow IRS regulations.
Holding Periods and Tax Rates
Holding periods still matter.
Short-term: 1 year or less, taxed at ordinary income rates.
Long-term: more than 1 year, taxed at preferential capital gains rates.
If you realize gains in a year when your income is low, you may benefit from lower capital gains tax rates.
2025 Long-Term Capital Gains Brackets (Federal)
Filing Status | 0% Up To | 15% Rate | 20% Rate Above |
Single | $48,350 | $48,351–$533,400 | $533,400 |
Married Filing Jointly | $96,700 | $96,701–$600,050 | $600,050 |
Head of Household | $64,750 | $64,751–$566,700 | $566,700 |
Married Filing Separately | $48,350 | $48,351–$300,000 | $300,000 |
(These thresholds are inflation-indexed and change each year.)
Net Investment Income Tax (NIIT)
NIIT is an additional 3.8% federal tax that can apply once income exceeds:
$200,000 (single)
$250,000 (married filing jointly)
Because NIIT thresholds are not inflation-indexed, more taxpayers get pulled in over time. For many higher earners, the combined federal long-term capital gains rate can reach 23.8% (20% + 3.8%), before state taxes.
The New Recordkeeping Reality for Crypto Transactions (This Is the Big Shift)
Per-Wallet and Per-Account Basis Tracking
Per-wallet and per-account basis tracking is now required in many contexts as reporting formalizes. Cost basis must be tracked within each wallet or account “bucket,” and broker reporting applies within that bucket. Many crypto tax software solutions allow users to connect their wallets and exchange accounts, streamlining data import and reporting for accurate bitcoin taxes 2025 compliance.
The “Basis Orphan” Problem
If older Bitcoin is transferred to a broker without acquisition data, it can result in “unknown basis” reporting. Practically, this means you may need:
CSV exports
bank records
historical exchange data
in some cases, blockchain forensics
Maintaining a complete transaction history across wallets and accounts is critical for accurate reporting. Always track the original cost basis for all transferred assets to ensure correct calculation of taxable gains or losses.
Rev. Proc. 2024-28 provides a transition approach allowing a one-time reasonable allocation of unused basis across wallets/accounts as of January 1, 2025 for taxpayers previously using universal methods.
Timing note: The safe harbor is time-sensitive—for many taxpayers, the ability to optimize an allocation can be affected by whether you had a sale/transfer/disposition early in 2025. If you were active at the start of 2025, it’s worth reviewing your records and method documentation with a professional.
1099-DA Timeline (High-Level)
For 2025 sales, brokers generally report gross proceeds for certain transactions.
Beginning in 2026, custodial brokers must report cost basis for covered digital assets under final Treasury regulations.
Noncovered assets may still show no basis.
Important: For 2025 forms, readers may see gross proceeds without cost basis. That does not mean you owe tax on the full proceeds—basis is still determined from your records.
Bottom line: We are moving from self-reported best-effort compliance to institutional-style reporting. If basis can’t be substantiated, tax can effectively be calculated as if basis were zero.
Determining Fair Market Value (FMV): The Foundation of Bitcoin Tax Reporting
FMV is the cornerstone of crypto tax reporting. Generally, FMV is the price on a reputable exchange at the time of the transaction. FMV drives:
capital gains/loss calculations when you dispose of Bitcoin
income recognition when you receive Bitcoin
Crypto tax software can help capture pricing and consolidate transaction data, but you still want records you can defend.
Non-Taxable Bitcoin Transactions: What Doesn’t Trigger a Tax Bill
Common non-taxable examples under current IRS guidance (often referred to as non taxable crypto transactions):
Transferring Bitcoin between your own wallets/accounts
Buying Bitcoin with fiat currency
Holding Bitcoin
Receiving a bona fide gift (not compensation)
Even for non-taxable activity, documentation matters—especially for large transfers or frequent movements.
December 2025 Update: DeFi Broker Rule Repealed
A reporting expansion aimed at certain non-custodial and DeFi participants was repealed under the Congressional Review Act in April 2025.
This repeal affects that specific DeFi expansion only. It does not roll back the broader 1099-DA framework for custodial brokers and exchanges.
Form 1099-DA and Tax Reporting: What’s Changing
Form 1099-DA is designed to increase third-party reporting of digital asset transactions. In practice, this means:
more broker/exchange reporting to taxpayers and the IRS
more IRS data matching
higher risk of mismatches if your records aren’t clean
Keep records of dates, amounts, fees, wallet/exchange identifiers, and your FMV source.
It’s important to reconcile what you report with what the IRS receives.
Crypto Mining and Taxation: Earning, Staking, and the IRS
The IRS generally treats mining rewards and staking rewards as ordinary income when received (dominion and control), based on FMV at that time. In addition, mining income is taxable in addition to other potential taxes, such as self-employment tax, if your mining activity rises to the level of a trade or business.
Airdrops are often taxable as ordinary income when you have dominion and control (FMV at receipt), depending on the facts.
Later, when you sell or exchange those assets, you may also have capital gains/losses based on the difference between your basis (FMV at receipt) and the sale price.
Mining may also implicate self-employment tax if your activity rises to a trade or business.
Exchange Transactions and Capital Gains Tax: What You Need to Know
Selling cryptocurrency—whether for fiat, goods/services, or other digital assets—is typically a taxable event. Converting one cryptocurrency to another, or to a stablecoin like USDC, is also considered a taxable event under IRS rules and must be reported.
Taxable examples include:
sales for fiat
crypto-to-crypto trades (including converting between cryptocurrencies or to stablecoins)
buying goods/services with Bitcoin
Crypto-to-crypto trades must be reported even if you never touch fiat. Gains and losses from these transactions are calculated based on the difference between your disposal price and original cost basis, including any fees.
Tax Loss Harvesting Deadline (Often Missed)
Unrealized losses have no tax value. Losses only occur and can be recognized for tax purposes when the asset is actually sold. To claim a loss for the current tax year, you must sell by December 31 at 11:59 PM local time.
Net losses offset gains first, then (federally) up to $3,000 of ordinary income per year, with the remainder carried forward indefinitely.
The Wash Sale Situation for Bitcoin (As of Dec 2025)
Bitcoin is treated as property, and IRC §1091 wash sale rules are written for stocks/securities, so §1091 does not explicitly cover Bitcoin the same way it covers traditional securities.
However, overly aggressive loss-harvesting patterns can still be challenged under broader anti-abuse doctrines, including the Economic Substance Doctrine.
Selling and rebuying the same asset minutes later is the kind of pattern you don’t want to defend.
More conservative approaches:
sell BTC and buy a correlated but different asset
wait before repurchasing BTC
ETF Nuance
Futures-based crypto ETFs are securities, so wash sale rules apply to those ETF shares. Spot Bitcoin ETFs are often structured as grantor trusts, creating uncertainty. Until the IRS provides clearer guidance, a conservative approach is to assume wash sale risk if selling and repurchasing the same ETF within 30 days.
Capital Gains Tax Planning Angles People Often Underuse
Step-Up in Basis (Never Selling)
Under current law, assets held until death generally receive a step-up in basis. Legislative risk exists, but it remains an important planning lens.
Borrowing Instead of Selling
Borrowing against Bitcoin generally is not income, but liquidation risk, counterparty exposure, and interest costs matter. Some structures can also create tax issues depending on facts.
(Replace “tax free crypto transactions” language with “non-taxable transactions under current IRS guidance,” where relevant.)
Charitable Giving
Donating appreciated Bitcoin directly to a qualified charity can provide a FMV deduction and avoid capital gains on appreciation.
Such crypto donations may be tax deductible if the charity is IRS-qualified and you maintain proper documentation, in accordance with IRS charitable contribution guidance.
Gifting
Gifting during market dips can reduce transferred value. The recipient generally takes the donor’s basis.
State Residency
State taxes can matter as much as federal. Domicile depends on facts and behavior, not mailing addresses.
New Jersey Note (Important)
New Jersey does not allow capital losses to offset wage income and generally does not allow capital loss carryforwards for individuals.
Puerto Rico Act 60
Act 60 can offer significant tax benefits for bona fide residents, but compliance is strict and pre-move gains may remain taxable under sourcing rules.
NFTs
IRS guidance introduced a look-through concept that may treat some NFTs as collectibles, potentially subject to a higher long-term rate (28%). Guidance is evolving.
Crypto Assets and Taxation: Beyond Bitcoin
While Bitcoin remains the most recognized digital asset, the cryptocurrency landscape now includes thousands of alternative coins (altcoins), stablecoins, NFTs, and tokens used in decentralized finance (DeFi) protocols. Each of these assets can present unique challenges when it comes to cryptocurrency tax reporting.
From a tax perspective, the IRS generally treats all virtual currencies as property, meaning that most transactions—whether you’re selling Ethereum, trading Solana for another token, or disposing of an NFT—are subject to capital gains tax upon disposition. The gain or loss is calculated based on the difference between your cost basis and the fair market value at the time of the transaction.
However, the specific IRS crypto tax rules can vary depending on the type of asset and the nature of your transaction. For example, NFTs may be subject to different long-term capital gains rates if classified as collectibles, while staking rewards or airdrops are typically recognized as ordinary income at the time you gain control over the asset. Disposing of stablecoins, even though they are pegged to fiat currency, can also trigger taxable events if there is a gain.
It’s important for taxpayers to understand that all crypto assets—regardless of their kind—are subject to IRS scrutiny. Accurate cryptocurrency tax reporting requires tracking the full transaction history, including dates, fair market values, and the specific nature of each transaction. Failing to report crypto transactions correctly can result in penalties, interest, or additional IRS attention.
As the IRS continues to refine its approach and expand third-party reporting requirements, most taxpayers will benefit from professional advice to ensure every type of crypto asset is reported correctly and in compliance with current IRS rules. Whether you’re trading, staking, receiving airdrops, or selling NFTs, understanding the tax implications from the outset can help you avoid surprises and take advantage of available planning opportunities.
Crypto Tax Software: Tools for a Smoother Filing Season
Crypto tax software can help consolidate wallets/exchanges, calculate gains/losses, and generate forms (Form 8949, Schedule D). It reduces manual error risk, but it’s not “set it and forget it”—you still want:
clean wallet labeling
complete imports
documented FMV sources
reconciled balances
Penalties and Enforcement: What Happens If You Get It Wrong
The IRS has made crypto compliance a priority, using third-party reporting and data matching. If you receive an IRS notice, respond promptly and consider working with a qualified tax professional.
Accurate records, consistent reporting, and timely filing are the best ways to reduce risk. Seeking professional tax advice can provide peace of mind when dealing with complex cryptocurrency tax issues.
Staying Compliant: Habits, Checklists, and Best Practices for 2025 and Beyond
Staying compliant with IRS crypto tax rules is more important than ever as cryptocurrency tax reporting requirements continue to evolve and enforcement increases. For most taxpayers, the difference between a smooth filing season and a stressful audit often comes down to habits and attention to detail. Here’s how to ensure your cryptocurrency transactions are reported correctly and your records are audit-ready:
Maintain a full transaction history: Keep detailed records of every cryptocurrency transaction—including dates, amounts, wallet addresses, transaction types, and counterparties. This documentation is essential for accuracy and for substantiating your tax positions if the IRS requests proof.
Understand and apply IRS rules: Familiarize yourself with the latest IRS crypto tax rules, including how to report capital gains, income tax, and self-employment taxes related to mining, staking rewards, or getting paid in crypto. IRS rules can change, so review updates each tax year.
Report all transactions correctly: Every taxable event—whether selling cryptocurrency, converting to fiat currency, trading one cryptocurrency for another, or receiving an airdrop—must be reported correctly on your tax return. Ensure that gains, losses, and income are calculated using the fair market value as of the transaction date.
Track fair market value: For each transaction, determine the fair market value using reputable sources or exchange data. This is critical for both income recognition and calculating gains or losses.
Stay current with changes: IRS reporting requirements, such as the introduction of Form 1099-DA and expanded third party reporting, are increasing. Monitor for regulatory/tax-law changes each January.
Leverage reputable apps and services: Use trusted crypto tax apps and accounting services to connect your wallets and exchanges, automate calculations, and generate required forms. However, always review outputs for accuracy and completeness.
Offset gains with losses: Take advantage of tax-loss harvesting opportunities by selling cryptocurrency at a loss before year-end to offset gains and potentially reduce your tax liability.
Retain all documentation: Save receipts, transaction confirmations, and any records related to mining, staking, airdrops, or gifts. Good documentation supports your reported figures and can be crucial in the event of an IRS inquiry.
Consider state taxes: Cryptocurrency tax obligations don’t stop at the federal level. Be aware of state tax rules, especially if you have moved or transact across state lines, as state taxes can impact your overall liability.
Seek professional advice: When in doubt, consult a qualified tax professional with experience in cryptocurrency tax reporting. Professional advice can help you navigate complex transactions, ensure compliance, and take advantage of available deductions or planning strategies.
By adopting these best practices and staying proactive about changes in IRS rules and reporting requirements, you can ensure your cryptocurrency tax reporting is accurate, compliant, and ready for whatever the IRS may require. Consistent habits and professional guidance are your best defense—and your best advantage—in the rapidly changing world of crypto taxation.
The Big Picture: Bitcoin Tax Compliance Going Forward
Bitcoin tax strategy isn’t about avoiding taxes. It’s about understanding what triggers tax, choosing the right structure, and maintaining audit-ready records as reporting requirements increase.
The biggest risk in 2025 and 2026 isn’t just under-reporting—it’s documentation failure. With wallet-by-wallet basis tracking and broker reporting, the edge isn’t the trade. It’s the records behind it.
Questions worth asking:
What’s my real time horizon with BTC?
Is my recordkeeping defensible per wallet and account?
Do state taxes change the math?
What would it look like if I never sold?
Conclusion and Next Steps
Bitcoin tax compliance in 2025 is increasingly documentation-driven. If you’re active across multiple exchanges and wallets—or you’ve been holding Bitcoin for years—now is the time to make your cost basis records audit-ready before reporting becomes even more standardized.
If you want help getting your records clean or understanding how these rules apply at a high level, Monaco CPA can help.
About the Author
Greg Monaco is a CPA based in New Jersey and the founder of Monaco CPA, where he focuses on cryptocurrency taxation and compliance for clients nationwide, including sales tax compliance for New Jersey small businesses.
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