Summary: 5 Steps to Report Crypto Taxes
As of 2025, cryptocurrency transactions in the U.S. are subject to capital gains tax and income tax. You must report all taxable crypto income on your tax return. Follow these steps:
| Step | Action |
|---|---|
| 1 | Calculate gains/losses from all transactions |
| 2 | Report disposals on Form 8949 |
| 3 | Summarize totals on Schedule D |
| 4 | Report crypto income on Schedule 1 |
| 5 | Complete remaining tax return sections |
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Cryptocurrency Tax Rates Explained
Your crypto tax rate depends on:
- Holding period (short-term vs. long-term)
- Income tax bracket
Short-Term Capital Gains (Held <12 months)
Taxed as ordinary income (10-37%):
| Tax Rate | Income Ranges (Single) |
|---|---|
| 10% | $0-$11,600 |
| 12% | $11,601-$47,150 |
| 22% | $47,151-$100,525 |
| 24% | $100,526-$191,950 |
| 32% | $191,951-$243,725 |
| 35% | $243,726-$609,350 |
| 37% | $609,351+ |
Long-Term Capital Gains (Held ≥12 months)
Preferential rates (0-20%):
| Tax Rate | Income Ranges (Single) |
|---|---|
| 0% | Up to $47,025 |
| 15% | $47,026-$518,900 |
| 20% | Over $518,900 |
How Different Crypto Transactions Are Taxed
| Transaction Type | Tax Treatment |
|---|---|
| Selling for fiat | Capital gain/loss |
| Crypto-to-crypto trades | Capital gain/loss |
| Wallet transfers | Non-taxable |
| Staking/mining rewards | Ordinary income |
| Airdrops | Ordinary income |
Reporting Process: Detailed Steps
Step 1: Calculate Gains/Losses
- Gather all transaction records
For each disposal:
- Determine proceeds (FMV at sale)
- Calculate cost basis (FMV at acquisition)
- Compute gain/loss: Proceeds - Cost Basis
Example:
- Buy 1 ETH for $2,500
- Sell 1 ETH for $3,500
- Report $1,000 capital gain
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Step 2: Complete Form 8949
- Part I: Short-term disposals (<12 months)
- Part II: Long-term disposals (≥12 months)
Include for each transaction:
- Description of asset
- Acquisition/sale dates
- Proceeds and cost basis
- Gain/loss amount
Step 3: Transfer Totals to Schedule D
- Summarize net gains/losses from Form 8949
Include on corresponding lines:
- Line 1b (short-term)
- Line 2b (long-term)
Step 4: Report Crypto Income
- Mining/Staking/Airdrops: Report on Schedule 1 as "Other Income"
- Business Income: Use Schedule C if applicable
Step 5: Finalize Tax Return
- Complete remaining personal/business tax forms
- Submit to IRS
Frequently Asked Questions
Q: How do I answer the crypto question on Form 1040?
A: Answer "Yes" if you:
- Received crypto as payment/reward
- Sold/exchanged any digital assets
Q: Do exchanges report to the IRS?
A: Yes. Starting 2026, all U.S. exchanges must file Form 1099-DA for capital gains/losses. Currently, some report income via Form 1099-MISC ($600+ threshold).
Q: Must I report small crypto amounts?
A: Yes. All taxable crypto activity must be reported regardless of amount.
Q: Can the IRS track my crypto?
A: Yes. The IRS uses:
- Exchange-reported forms
- Blockchain analysis tools
Final Recommendations
- Maintain Detailed Records: Keep complete logs of all transactions
- Use Specialized Software: Automate calculations and form generation
- Consult a Tax Professional: For complex situations or large portfolios
Start your crypto tax reporting today with tools that streamline the entire process.