Cryptocurrency Taxes: What You Need to Know For 2025

Even though you can buy or sell cryptocurrency on an exchange, it is still unregulated, and it does not qualify as a security. This may lead some taxpayers to think that cryptocurrency can’t be taxed. Unfortunately for them, this is incorrect. But how exactly should you pay taxes on your cryptocurrency? Read on to learn more. 

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What’s New In Cryptocurrency Taxation for 2024?

Cryptocurrency is still taxable — but the tax rate you’ll pay is highly dependent on the type of transaction and your income for the year.

Cryptocurrency is viewed as property — so any gains or losses from buying or selling crypto are considered capital gains or losses. But if you receive crypto as a form of payment for goods or services — this is considered income.

The capital gains tax rates and income tax rates changed in 2024. Here’s a quick rundown of the new rates straight from the IRS:

Cryptocurrency Capital Gains Tax Table 2024

Cryptocurrency Income Tax Table 2024

These tax rates are also updated for 2025. Here’s the new 2025 tax rates for capital gains and income taxes: [1]

Cryptocurrency Capital Gains Tax Table 2025

Cryptocurrency Income Tax Table 2025

Cryptocurrency and the IRS: How It’s Classified

The IRS classifies cryptocurrency as property (and not a currency) for the purposes of taxation. This is similar to real estate — when you buy or sell cryptocurrency, you are assessed capital gains or losses.

For example; If you buy $100 worth of a cryptocurrency, and later sell it for $200 — this would be a $100 capital gain. And if you held the cryptocurrency for over a year, this would be classified as a long-term capital gain — otherwise it’s treated as a short-term capital gain.

Cryptocurrency transactions can also be taxed as income. For example; If you provide products or services and are paid in cryptocurrency — this transaction is considered taxable income.

The IRS hasn’t changed its stance on how cryptocurrency is classified — but with a new administration coming into office in 2025, there may be a few shakeups to watch out for.

Do You Need to Pay Taxes on Cryptocurrency?

If you sell cryptocurrency for a gain — yes, you will most likely need to pay taxes on that income. But the amount you pay (or if you pay at all) depends on your income, tax bracket and other factors.

In terms of cryptocurrency taxation, the IRS views crypto as a capital asset. This puts it in the same category as stocks, bonds, mutual funds, exchange-traded funds or any other such asset. 

Capital gains tax comes in two forms: long-term and short-term.

• Long-term capital gains tax rates are special rates that give a break to taxpayers who hold their capital assets for longer than one year. They range from 0% to 20%, depending on your income.
• Short-term capital gains rates, on the other hand, apply to trades on assets held for one year or less. These gains are taxed at ordinary income rates, which for tax year 2024 – 2025 range from 10% to 37%. 

Thus, the income tax rate on your cryptocurrency trades depends on two things: your holding period and your income. 

Taxable Gain Example

Say you buy $1,000 of a cryptocurrency when it trades at $10, giving you 100 coins or tokens. Six months later, when that crypto is trading at $20, you sell your 100 coins to cash out $2,000.

Since you paid $1,000 for your crypto and are now receiving $2,000 in value for it, according to the IRS, you have a $1,000 taxable gain.

Whether or not that gain is taxed at ordinary income rates or capital gains rates depends on whether or not you have held that crypto for more than one year or not.

Mining, Staking and Airdrops: How Are They Taxed?

Buying and selling cryptocurrency isn’t the only way to trigger tax consequences. If you mine cryptocurrency, earn interest from staking or receive coins from an Airdrop — that crypto is taxable as ordinary income. The same is true if you are paid in cryptocurrency for goods or services, such as if you are the owner of a store and your customers use crypto instead of cash or a credit card.

Using Your Crypto for Purchases May Be Taxable

It makes sense that crypto used for purchases is taxable as income to the seller. But what may take more mental gymnastics to understand is that if you are the one using crypto to make a purchase, that transaction may be taxable to you as well. 

As the IRS views it, when you use your crypto to make a purchase, you are essentially exchanging your crypto for dollars to acquire your goods or services. This conversion can be a taxable event if the value of the goods or services you’re buying is higher than the original cost of your cryptocurrency. 

You Can Deduct Your Crypto Losses

The silver lining to the taxation of your cryptocurrency is that you’re also able to deduct any losses you may have.

Using the example above, if you instead used that crypto you paid $1,000 for and sold or exchanged it for only $500, then you’d be able to claim a capital loss of $500.

As with other capital assets, you can use that loss to offset any taxable gains you may have, and if you have excess losses, you can offset up to $3,000 of ordinary income as well. Additional losses can be carried over to future years.

Do You Have To Report Crypto Under $600?

Generally speaking, 1099s are not issued to taxpayers for amounts under $600. This includes cryptocurrency exchanges or clients you may have who paid you in crypto. However, this doesn’t mean that the income is not reportable.

Although the IRS may only be informed if you have generated income in excess of $600, whether or not it is directly notified, taxable income is taxable income, and you are legally required to report it. 

Note that in some instances, you may not receive a 1099 for your crypto income unless you exceed 200 transactions and earn more than $5,000 in 2024 ($2,500 in 2025). This reporting requirement was supposed to drop to just $600 for tax year 2022, but at the last minute, the IRS delayed this change until tax year 2026. 

However, whatever the legal requirement is, some crypto exchanges — or perhaps some of your clients — may still issue 1099s to both you and the IRS reporting your transactions, even if they fall below the legal limit.

How to Report Cryptocurrency on Your Taxes

When you file your taxes, the first thing you’ll have to do is check the box asking if you participated in any crypto activities during the prior year. According to the IRS, the tax form for the 2024 tax year asks if you received, sold, exchanged, gifted or disposed of a digital asset.

Next, you’ll have to report any income and/or capital gains related to your crypto activity. Income from mining, for example, will have to be reported on Schedule C, as it will generally be considered to be self-employment income. The same is true if you run a business and accept crypto in exchange for goods or services. 

Transactions from buying or selling crypto will appear on Schedule D, just as it would for any stock transactions you may have. You may also have to use Form 8949.

How to Lower Your Cryptocurrency Tax Bill

You can lower your crypto tax bill in several ways:

Sell losers. If you have been holding crypto that lost a lot of value, selling that crypto can help offset the gains from any crypto you sold for a profit.

Itemize deductions. If you have large expenses that exceed your standard deduction, you may want to itemize your deductions to help lower your taxable income. This can offset large crypto capital gains taxes.

Claim tax credits. Don’t forget to claim all the tax credits you qualify for. This can reduce your tax bill dollar-for-dollar and help offset crypto profits for the year.

How Cryptocurrency Is Taxed Internationally

Crypto tax laws vary around the world — with most nations taxing cryptocurrency as property or an investment. The United States taxes cryptocurrency as a property — with sales resulting in a capital gain or loss.

Tax rates on cryptocurrency vary around the world as well. Some nations charge higher rates on crypto transactions, while others don’t charge any taxes on cryptocurrency. It’s important to understand your country’s tax laws surrounding cryptocurrency before preparing your tax return.

Crypto Tax Software and Tools for 2025

There are several cryptocurrency tax software tools that can help you navigate the complicated world of crypto taxes. Here are a few of the top one available today:

Koinly. Koinly is a robust crypto tax software that can connect to your crypto exchange account and digital wallets to track your transaction and create IRS-friendly reports for your tax return. Koinly is available internationally, and supports DeFi wallets, major exchanges and even NFTs.

CoinLedger. CoinLedger offers tracking of multiple wallets and exchange accounts — creating a ledger of your crypto transactions that you can use for your tax returns. The free version just tracks your transactions, but paid versions create IRS reports and forms –and even integrate with major tax software.

CoinTracker. CoinTracker is a comprehensive crypto tax planning and reporting software that connects to most wallets and crypto exchange accounts. You can get IRS tax reports automatically created, track your crypto portfolio across all accounts, and even plan for advanced tax strategies such as tax-loss harvesting.

The Bottom Line

Taxation of any capital asset can be complicated, but this is particularly true in terms of cryptocurrency. As even seemingly innocuous activities like using crypto to buy a cup of coffee can result in a taxable transaction, it’s usually a good idea to enlist the aid of a tax professional if you have any involvement with cryptocurrency.

John Csiszar contributed to the reporting of this article.

Information is accurate as of Jan. 1, 2025.