Complete guide to crypto taxes in the US for 2025 (IRS Form 8949)

How does the IRS treat cryptocurrency?

The IRS treats cryptocurrency as **property**, not currency. This means every time you sell, trade, or use crypto to buy something, you have a taxable event that must be reported.

What triggers a taxable event?

Selling crypto for USD or other fiat

Trading one crypto for another (yes, even crypto-to-crypto swaps)

Using crypto to pay for goods or services

Receiving staking rewards or mining income (taxed as ordinary income)

Receiving airdrops (taxed as ordinary income at fair market value)

What is NOT taxable?

Transferring crypto between your own wallets

Buying crypto with USD (only taxable when you sell)

Holding crypto (no tax until you sell)

Short-term vs long-term capital gains

Held less than 1 year: taxed as ordinary income (up to 37%)

Held more than 1 year: taxed at preferential long-term rates (0%, 15%, or 20%)

How to report: Form 8949 & Schedule D

Every taxable transaction must be reported on **Form 8949**, which then flows into **Schedule D** of your Form 1040. You need to report:

Date acquired

Date sold

Proceeds

Cost basis

Gain or loss

Cost basis methods

The IRS allows **FIFO** (First In, First Out) by default, but you can use Specific Identification if you keep proper records.

Conclusion

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