2025 Crypto Tax Changes: What Investors Must Know
The tax landscape for cryptocurrency is undergoing significant changes in 2025. The IRS is implementing new regulations and reporting requirements aimed at tightening crypto tax compliance. For crypto investors and businesses, it’s critical to understand what’s changing—and how to adapt—to avoid costly mistakes. In this update, we outline the key new rules for 2025 and provide tips on how to remain compliant and penalty-free under the heightened scrutiny.
Form 1099-DA: IRS Will Receive Your Crypto Transaction Info
One of the biggest shifts is the introduction of Form 1099-DA, a new tax form that cryptocurrency exchanges and brokers will use to report user transactions to the IRS. Starting January 1, 2025, U.S. digital asset brokers must track and report crypto sales by their customers. For the 2025 tax year, Form 1099-DA will report the gross proceeds from your cryptocurrency sales. By 2026, these forms may also include cost basis and gain/loss information, aligning with the 1099-B forms used for stocks.
What this means: The IRS will receive your crypto sale data directly from exchanges. A major mistake is failing to report those same transactions on your return. In the past, some taxpayers assumed crypto trades might go unnoticed. With Form 1099-DA, that era is over.
How to adapt: Reconcile your records with those of the exchange. Look for 1099-DA forms in early 2026 (for the 2025 tax year). Keep documentation of your purchase prices and confirm the cost basis is accurate. Assume the IRS has visibility into your crypto activity—because they will.
New Cost Basis Rules: Temporary Relief, But Act Now
Another major change involves how you identify which crypto units you sell. The IRS finalized regulations in 2023 requiring taxpayers to use specific identification when calculating cost basis. If not, the default is FIFO (first-in, first-out). Originally set for 2024, enforcement was delayed due to lack of readiness by exchanges. The IRS granted transitional relief through 2025.
Don’t get complacent: The relief is temporary. Taxpayers must still maintain records and apply a consistent cost-basis method in 2025. Brokers may begin enforcing FIFO by default in 2026 if no specific ID is provided.
How to adapt: Choose a cost-basis method (FIFO, LIFO, HIFO, etc.) and apply it consistently. Track which units you sell and when. This effort will ensure smooth compliance when enforcement begins.
The IRS Asks About Crypto on All Tax Returns
Since 2020, the IRS includes a digital asset question on tax returns. By 2024, it appears on Forms 1040, 1120, and 1065. It asks whether you engaged in any crypto transaction during the year.
Mistake to avoid: Checking “No” when you had crypto activity is considered a false statement. Lying here can trigger an audit or even lead to fraud charges.
How to adapt: Answer “Yes” if you sold, traded, mined, staked, received payments, or earned rewards in crypto. If you bought and held crypto all year, with no transactions, you may safely check “No.” When in doubt, choose transparency.
Avoiding Underreporting and Other Common Pitfalls
With new data sharing and enforcement tools, underreporting crypto income is a serious risk. For instance, if an exchange reports $100,000 in proceeds on Form 1099-DA, but you report only $50,000, that discrepancy will likely trigger an IRS notice.
Newer crypto activities—like DeFi, NFTs, and staking—are also under scrutiny. Many taxpayers mistakenly believe these transactions are not taxable. They are.
How to adapt: Ensure you report all crypto-related income: mining rewards, staking interest, DeFi yield, NFT sales, and more. Even small purchases using crypto can create capital gains. Keep detailed records. If you discover errors from prior years, consult a tax professional about filing an amended return.
Final Thoughts
2025 marks a turning point in U.S. crypto tax enforcement. The IRS is sending a clear message with Form 1099-DA and expanded disclosure questions. The best defense is full compliance: accurate reporting, honest answers, and strong records.
Treat crypto activity like traditional securities or income—with the same level of diligence. That approach ensures you’re on the right side of the law.
For professional help reconciling your crypto transactions, contact TrueScope Consulting for a confidential consultation.
