If you bought, sold, traded, or earned crypto in 2024, you owe taxes on it. The IRS isn’t asking nicely anymore-they’re tracking every transaction. Starting January 1, 2025, crypto exchanges like Coinbase and Kraken are legally required to report your sales and trades to the IRS using a new form: Form 1099-DA. This isn’t a suggestion. It’s enforcement. And if you ignored crypto taxes last year, 2025 is when the hammer comes down.

What the IRS Actually Considers a Taxable Event

You don’t need to sell crypto to owe taxes. The IRS treats crypto like property, not currency. That means every time you trade, spend, or earn it, you trigger a taxable event. Here’s what counts:

• Selling crypto for USD
• Trading one crypto for another (like BTC for ETH)
• Using crypto to buy goods or services
• Earning crypto from mining, staking, or airdrops
• Receiving crypto as payment for work or services

Even transferring crypto between your own wallets doesn’t trigger tax-unless it’s between two different exchanges. That’s a trap. If you sent Bitcoin from Coinbase to Kraken, both platforms will report it as a sale. You didn’t cash out, but the IRS sees it as one. And now they have the data to prove it.

How Much Tax You Owe: Short-Term vs Long-Term Gains

Your tax rate depends on how long you held the asset. Hold it less than a year? You pay your regular income tax rate. Hold it longer? You get a break.

Short-term capital gains (held 365 days or less): Taxed at your ordinary income rate. For 2025, that’s 10% to 37% depending on your income. Single filers making over $651,200 pay 37%. If you’re in the 24% bracket, every dollar of profit from a quick trade gets taxed at 24%.

Long-term capital gains (held 366+ days): Much lower. Rates are 0%, 15%, or 20%. For single filers:

• 0% if your taxable income is $48,350 or less
• 15% if your income is between $48,351 and $533,400
• 20% if you make over $533,401

Married couples filing jointly get higher thresholds: 0% up to $96,700, 15% up to $600,050, and 20% above that.

Example: You bought 1 BTC for $40,000 in March 2023. You sold it for $60,000 in April 2025. That’s a $20,000 gain. Since you held it over a year, you pay 15% = $3,000 in taxes. If you’d sold it in January 2025, you’d pay your full income tax rate-possibly $7,400 more.

Form 1099-DA: The New Crypto Report Card

This is the biggest change in 2025. Before, exchanges only gave you a summary. Now, they’re legally required to send the IRS a Form 1099-DA for every sale or trade you made in 2024. It shows the total dollar amount you received from selling or exchanging crypto-called gross proceeds.

But here’s the catch: Form 1099-DA doesn’t include your cost basis. That’s the price you paid for the crypto. The IRS doesn’t get that info until 2026. So for 2025 taxes, you’re on your own to figure out how much you actually made.

That means if you bought Bitcoin at $30,000 and sold it for $50,000, your gain is $20,000. But your 1099-DA will say $50,000. If you don’t report the $30,000 cost basis, the IRS assumes you made $50,000 in profit-and taxes you on the whole thing. That’s a $7,400 mistake for someone in the 37% bracket.

What Exchanges Don’t Report (And Why It’s Dangerous)

Form 1099-DA only applies to centralized exchanges that act as brokers: Coinbase, Kraken, Binance.US, etc. It does NOT cover:

• Decentralized exchanges (Uniswap, SushiSwap)
• Self-custody wallets (MetaMask, Ledger)
• DeFi protocols (Aave, Compound, Curve)
• Peer-to-peer trades

That’s a problem. About 23.7% of crypto users actively trade on DEXs or DeFi platforms, according to Coinbase’s March 2025 data. If you used Uniswap to swap ETH for DAI, or staked SOL on a non-custodial node, you got no 1099. But you still owe tax.

Here’s what the IRS sees: You have a $12,000 gain reported from Coinbase. But you made $8,000 more in DeFi and didn’t report it. They don’t know about the DeFi part-but they’ll see the gap when they cross-check your bank deposits, wallet addresses, and transaction patterns. Audits are up 217% in Q1 2025 compared to last year. Don’t assume you’re invisible.

How to Track Your Cost Basis (The Hard Part)

Your profit isn’t the sale price-it’s the sale price minus what you paid. But if you bought Bitcoin five times at different prices, which one do you use? The IRS says: First-In, First-Out (FIFO) is the default.

Example: You bought:

• 0.5 BTC at $35,000 (Jan 2023)
• 0.3 BTC at $42,000 (May 2023)
• 0.2 BTC at $50,000 (Dec 2023)

You sell 0.7 BTC in March 2025 for $65,000. FIFO means you use the first two purchases: 0.5 BTC at $35,000 + 0.2 BTC at $42,000 = $25,900 cost basis. Your gain: $65,000 - $25,900 = $39,100.

But you can choose specific identification if you document it. Say you want to sell the 0.2 BTC bought at $50,000 to minimize gains. You must record the exact date, amount, and price of that purchase. No guesswork. No memory. You need proof.

Most people don’t do this. That’s why TurboTax saw 42% higher error rates for users with transactions across three or more platforms. If you’re mixing Coinbase, Kraken, and MetaMask, you’re playing Russian roulette with your tax return.

Staking, Airdrops, and Mining: Ordinary Income

Earning crypto isn’t a gift. It’s income. When you get staking rewards, mining payouts, or an airdrop, you owe tax on the fair market value at the moment you receive it.

Example: You earned 0.5 ETH from staking on January 15, 2024. ETH was worth $3,200 that day. You owe ordinary income tax on $1,600. Later, you sell that ETH for $4,000. You now have a $2,400 capital gain on top of the $1,600 income.

DeFi liquidity providers got some relief in May 2025 with IRS Rev. Proc. 2025-18. If you can show a reasonable method for calculating income from pool rewards, you’re not automatically penalized. But you still need to track it. No more “I didn’t know I had to report it.”

Tools That Actually Work (And Which Ones Don’t)

You can’t do this manually if you’ve made more than five trades. Use software. But not all tools are equal.

• TurboTax Crypto: Integrates directly with Coinbase, Kraken, and Binance.US. Good for centralized traders. Score: 4.5/5
• CoinTracker: Handles DeFi and wallets better. But still struggles with Uniswap v3 concentrated liquidity. Score: 3.9/5
• Koinly: Strong on international users. Less reliable for U.S. tax forms. Score: 3.7/5
• Excel: Possible, but error-prone. One wrong formula = $10,000 mistake.

Trustpilot reviews show 3.7/5 average rating. Common complaints: “It didn’t catch my Uniswap swap,” or “It counted my wallet transfers as sales.” If you’re using multiple platforms, double-check the output. Don’t trust the numbers blindly.

When to Hire a Pro (And How Much It Costs)

If you’ve traded across three or more platforms, used DeFi, mined, or earned staking rewards, hire a CPA who specializes in crypto. The average cost: $500-$900. Simple returns: $285. Complex ones: up to $1,200.

Why? Because mistakes cost more. Ernst & Young estimates 68% of crypto investors will underreport in 2025. The IRS is catching them. A single audit can cost you $10,000 in back taxes, penalties, and interest.

Look for CPAs with the AICPA’s Digital Asset Tax Resource Center certification. Or ask: “Have you filed Form 8949 for crypto in the last 12 months?” If they say no, walk away.

What’s Coming in 2026 and Beyond

2026 is when things get even stricter. Brokers will be required to report cost basis on Form 1099-DA. That means you’ll get a pre-filled tax form with your gains calculated. But only if you used a centralized exchange.

DeFi? Still no reporting. The Digital Asset Reporting Compliance Act of 2025 (H.R. 1839) could change that-but it’s stuck in Congress. Senate Finance Chair Ron Wyden says bipartisan agreement on DEX regulation is “elusive.”

By 2027, the IRS may start requiring reporting of staking and yield farming rewards directly on 1099-DA. That’s a big deal. Right now, you have to track every reward manually. Soon, they might do it for you.

Long-term, the goal is full alignment with stock taxation. PwC predicts 92% of crypto rules will match traditional assets by 2027. But until then, you’re navigating a messy, shifting landscape.

What to Do Right Now

It’s November 2025. Your 2024 crypto taxes are due April 15, 2026. Here’s your action plan:

1. Export all transaction history from every exchange and wallet you used in 2024.
2. Use a crypto tax tool to import and calculate gains. Verify the cost basis matches your records.
3. Identify any DeFi, mining, or airdrop income. Add those as ordinary income.
4. Fill out Form 8949 and Schedule D. Don’t skip this.
5. If you’re unsure, consult a crypto-savvy CPA before filing.

Don’t wait. The IRS has your data. Your wallet activity is already in their system. The only question left is whether you’ll pay what you owe-or face the consequences.