For federal tax purposes, the IRS treats most digital assets as property. That means selling, swapping, or spending crypto generally triggers a capital gain or loss, while activities like staking, mining, airdrops, and getting paid in crypto are ordinary income when you receive them. The 2025 filing season also adds a new layer: brokers must begin reporting gross proceeds from digital‑asset sales on Form 1099‑DA for transactions on or after January 1, 2025 (basis reporting follows in 2026). You must also answer the digital assets question at the top of your return each year. (Sources throughout.)
If you want to see how other jurisdictions treat crypto for context, compare this with our explainers on India’s crypto taxes and Indonesia’s crypto tax changes, and check our U.S. policy overview in State of Crypto: The Unsettled U.S. Crypto Tax Scene.
If you dispose of crypto held as a capital asset (sell for USD, swap one coin for another, or spend it), report each disposal on Form 8949 and summarize on Schedule D. Short‑term gains (held ≤ 1 year) are taxed at ordinary rates; long‑term gains (> 1 year) get capital‑gains rates. The IRS explains which forms to use, how to determine basis, and how to answer the digital‑asset question on Form 1040.
In 2025, custodial brokers will start sending Form 1099‑DA showing gross proceeds from your digital‑asset sales; you still must compute gains/losses yourself. Starting with 2026 sales, brokers will also furnish basis and gain/loss for covered assets, which should make reconciliations easier. Keep records anyway—wallet addresses, timestamps, cost basis, and fees—and use specific identification where possible to control which lots you sell. (See IRS pages cited at the end.)
Accurate records make tax time easy—especially in 2025 when 1099‑DA begins. Good workflow: export CSVs from every exchange and wallet, reconcile on a crypto‑tax platform (e.g., CoinLedger, CoinTracker, Koinly, TokenTax), then spot‑check high‑value disposals by hand. Your software should: (1) support specific ID lot selection; (2) reconcile staking/mining income vs. capital disposals; (3) track fees precisely; and (4) produce Form 8949 and a Schedule D summary. Keep raw exports and signed PDF copies with your return for at least three years.
Do I have to answer the “digital assets” question on Form 1040? Yes—everyone must check Yes or No each year. “Yes” generally applies if you sold, exchanged, or received digital‑asset income; a simple buy‑and‑hold with USD is typically No.
How are staking rewards taxed? As ordinary income at fair‑market value when received. Your basis equals that value; later sales trigger capital gains/losses from that basis.
Are crypto‑for‑crypto swaps taxable? Yes; you’re disposing of one asset and acquiring another.
Can I still claim like‑kind exchange on old swaps? IRS memoranda indicate crypto‑for‑crypto didn’t qualify even before 2018, and since 2018 §1031 is limited to real estate.
What forms will I see in 2025? Expect Form 1099‑DA from custodial brokers for gross proceeds on 2025 sales. You’ll still file Form 8949 and Schedule D; ordinary income (staking/mining/forks) goes on Schedule 1 (or Schedule C if you’re operating a trade or business).
This article is educational and not tax, legal, or accounting advice. Consult a qualified professional about your situation.
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Also read: The Best Crypto Exchanges for US Residents
