If you’ve ever found yourself staring at your wallet history, unsure of what needs to be reported to the IRS, you’re not alone. Many investors in the United States deal with this uncertainty every tax season. The IRS has been tightening its grip on digital assets, and failing to file correctly can lead to serious problems. You might face audits, penalties, or letters demanding answers.
This article will help you avoid these issues. It will walk you through a checklist that makes tax reporting easier. You’ll learn what the IRS expects, how to prepare your documents, and which forms to use. Whether you’ve traded, mined, staked, or simply held crypto, this guide gives you the steps you need to stay on track. Let’s start by understanding your IRS responsibilities as a crypto investor.
Understanding Your IRS Crypto Tax Responsibilities
As per the American Crypto Tax Laws, the IRS treats crypto as property. That means buying, selling, trading, and even earning crypto creates tax obligations. If you use crypto to pay for goods or services, that counts as a taxable event too. Any increase in value between the time you got the crypto and the time you used it is considered a gain.
The IRS requires you to report both income and capital gains from crypto. Income can include mining rewards, staking payouts, or payments you receive in crypto. Capital gains arise when you sell or trade crypto for more than you paid for it. The key is tracking everything and knowing what to report.
The Complete IRS Crypto Tax Reporting Checklist
Now that you know the IRS treats crypto like property, it’s time to build your reporting checklist. This section outlines the tasks you should complete before filing your taxes.
Keep Detailed Records of Every Transaction
Accurate recordkeeping is essential for calculating your tax correctly. This section explains what details to collect and how they help.
Record Basic Transaction Details
Make sure you track the key data for every crypto transaction:
- The date of each transaction (purchase, sale, trade, or earning).
- The type of transaction (buy, sell, swap, or earn).
- The fair market value (FMV) of the asset in USD at the time of the transaction.
These details help you determine your tax obligations and provide evidence in case the IRS requests documentation.
Track Your Cost Basis
Your cost basis helps determine your gains or losses:
- Record how much you paid for the crypto.
- Include any transaction fees in the total cost.
- Calculate your full acquisition cost by adding the price and fees.
This information is essential for accurate capital gains reporting.
Save Supporting Documentation
Documentation supports your records and ensures everything is verifiable:
- Wallet addresses that are involved in each transaction.
- An exchange or platform used for trade.
- Screenshots, receipts, or confirmation emails for each transaction.
Storing this information in one place makes it easy to review at tax time. To make this task easy, software like KoinX lets you automatically import transactions from over 300 wallets and exchanges. It organises all relevant details so you don’t have to enter anything manually.
Categorize Your Crypto Transactions
Different crypto activities are taxed differently. This section explains how to classify your transactions so that you use the correct tax treatment.
Income Transactions
These are activities where you earn crypto:
- Mining rewards.
- Staking payouts.
- Interest earned from lending platforms.
- Payments received in crypto.
These are treated as ordinary income and taxed based on the value of the crypto at the time you received it.
Capital Gains Transactions
These happen when you dispose of crypto:
- Selling crypto for fiat like USD.
- Swapping one crypto for another.
- Spending crypto to buy goods or services.
Capital gains tax applies here, depending on how long you held the asset.
Non-Taxable Transactions
These transactions don’t trigger tax but still need to be tracked:
- Moving crypto between your wallets.
- Holding crypto without selling (HODLing).
Keeping them documented ensures that your cost basis is accurate and your records are complete. However, KoinX automatically identifies each transaction type and categorises them based on IRS rules. This makes it easier to prepare your tax return without manual sorting.
Calculate Capital Gains and Income Accurately
Once your transactions are organised, you need to calculate how much tax you owe. This section walks you through each step.
Determine Your Cost Basis
For each crypto asset:
- Use the original purchase price.
- Add any transaction fees.
- This total is your cost basis.
Calculate Gains or Losses
To find out your capital gain or loss:
- Subtract the cost basis from the sale or trade price.
- If the result is positive, you made a gain.
- If the result is negative, you made a loss.
Apply the Right Tax Rate
The tax rate depends on how long you held the asset:
- If crypto is held for less than 12 months and then disposed of, it’s a short-term gain. It is taxed at your ordinary income rate.
- If crypto is held for more than 12 months and then disposed of, it’s a long-term gain. Such gains are taxed at lower rates (0%, 15%, or 20%, depending on your income).
Calculate Crypto Income
This applies to staking, mining, airdrops, or payments received in crypto. For income-based transactions:
- Use the FMV in USD on the date you received the crypto.
- Treat this amount as ordinary income on your tax return.
To automate the process, use KoinX, which calculates gains, losses, and income for each transaction. It uses accepted cost basis methods like FIFO, LIFO, or HIFO depending on your settings.
Identify and Include All Required IRS Tax Forms
Once you calculate your crypto income and capital gains, the next step is reporting them correctly. This section explains which IRS forms you need to include when filing your tax return.
Form 8949: Report Each Crypto Transaction
Form 8949 is used to report every sale, trade, or disposal of cryptocurrency. You must list each transaction separately and include the date acquired, date sold, sale proceeds, cost basis, and the resulting gain or loss.
After completing this form, you’ll transfer the total values to Schedule D. This form ensures that the IRS receives a complete record of your capital asset disposals during the year.
Schedule D: Summarise Capital Gains and Losses
Schedule D provides a summary of the gains and losses you reported on Form 8949. It combines both short-term and long-term capital gains and helps calculate your total net gain or loss for the tax year. You must attach this form to your main Form 1040 return. If you’re filing with assistance from a tax platform, make sure the numbers match your 8949 report exactly.
Schedule C: Report Business Income from Crypto
If you earn crypto as part of a self-employed activity, you’ll need to use Schedule C. This applies if you’re mining cryptocurrency or receiving crypto as a business payment. The income must be reported as part of your gross earnings. You can also list any business-related expenses, such as hardware costs or internet services, to reduce your taxable income.
Schedule 1: Report Other Crypto Income
Schedule 1 is used to report crypto income not tied to a business. If you earned crypto through airdrops, staking rewards, interest, or bonuses that don’t fall under self-employment, this is the form you use.
You’ll enter the total value of the crypto you received, calculated at fair market value on the date of receipt. This income will then be added to your total gross income for the year.
Form 1099-MISC: Issued by Service Providers
Crypto service platforms may issue Form 1099-MISC if you’ve earned $600 or more in rewards. These can include staking payouts, referral bonuses, or other promotional earnings in cryptocurrency.
You should use the information in this form to report your income accurately. If you don’t receive a 1099-MISC, you’re still responsible for reporting all taxable income.
Form 1099-B: May Be Used by Exchanges
Although not all crypto exchanges currently issue Form 1099-B, some may start doing so in the near future. This form is generally used to report the sale or exchange of capital assets, including crypto.
If you receive this form from a platform, you should compare it with your transaction records. The amounts should match your reported capital gains on Form 8949 and Schedule D.
Digital Asset Question on Form 1040
Every taxpayer must now answer a yes-or-no question on Form 1040. The question asks whether you received, sold, exchanged, or otherwise disposed of a digital asset during the year.
Filing Deadlines and Extensions for Crypto Taxes
You’ve now reviewed your data and determined your income and gains. This part helps you understand when to submit everything.
For the 2024 tax year, the filing deadline is April 15, 2025. If you are a US expat, you have until June 15, 2025. If you need more time, you can file for an extension using Form 4868. This moves your deadline to October 15, 2025.
Remember, filing an extension only gives you more time to submit forms. You still need to pay any taxes owed by the original April deadline. Failing to do so may lead to interest or penalties.
Upcoming IRS Changes for 2025 Filings
While the current rules for reporting your 2024 crypto taxes remain the same, the IRS has introduced new reporting requirements that will take effect for the 2025 tax year. These changes will impact how you report crypto transactions on returns filed in 2026.
New Broker Reporting Requirements
Starting in 2025, digital asset platforms will be required to report user transactions to the IRS using Form 1099-DA. This new form will work similarly to the traditional 1099 forms used in the stock market. It will provide details such as asset type, transaction dates, proceeds, and gain or loss.
If you use an exchange or platform that qualifies as a broker under the new rules, you will likely receive this form for the 2025 tax year. It will help you match your records with the data reported to the IRS. However, you will still be responsible for reporting your complete crypto activity.
Gift Tax Exclusion Increase
In 2025, the IRS will raise the annual gift tax exclusion from $18,000 to $19,000 per recipient. If you give crypto as a gift below this amount, you will not need to file a gift tax return. Couples using gift splitting may give up to $38,000 per recipient without triggering a reporting requirement.
You should still keep records of any gifts, including the date, value, and recipient details, in case you need to support your filing later.
Wallet-Level Cost Basis Tracking
The IRS will begin requiring taxpayers to track the cost basis of digital assets per wallet or account. This means you must calculate your gains or losses based on where each asset was stored, not just the overall value in your portfolio.
To stay prepared, you should maintain separate records for each wallet, including acquisition dates, amounts, and values. Organizing this data ahead of time will help you report accurately when the new rules apply.
How Tools Like KoinX Simplify Crypto Tax Reporting?
If you are looking for a dependable crypto tax software, then KoinX is where your search ends. It simplifies the entire process of tracking, calculating, and reporting your crypto taxes in the United States.
Auto-Sync Transactions from Wallets and Exchanges
KoinX supports seamless integration with 300+ exchanges, blockchains, and wallets. It automatically imports your entire transaction history so you don’t have to do any manual entry.
Auto-Categorisation of Transactions
Once imported, KoinX categorises your transactions according to IRS tax treatment. It identifies income, capital gains, and non-taxable events so you know exactly how each activity should be reported.
Smart Tax Calculations and Error Checks
KoinX applies accurate tax logic and detects common filing errors. It calculates short-term and long-term capital gains, income from staking, airdrops, and more.
Secure and Easy to Use
Your data stays encrypted and safe, and the user interface makes tax filing simple, even if it’s your first time.
Get started with KoinX today and make your crypto tax filing stress-free and accurate.
Conclusion
Filing crypto taxes doesn’t have to be stressful. When you follow a checklist, the process becomes more manageable. You stay organized, avoid missing key steps, and reduce your chances of dealing with penalties or audits.
This checklist has shown you how to prepare, track, calculate, and report your crypto activity. By using tools like KoinX, you can simplify even the most complex parts of crypto tax reporting. The IRS continues to refine its approach to digital assets, so staying prepared now helps you in future tax seasons too.
Frequently Asked Questions
Can I offset my crypto losses against stock market gains?
Yes. You can use crypto capital losses to offset capital gains from stocks or other assets. This helps reduce your total tax liability. After offsetting all gains, you can deduct up to $3,000 in net losses against ordinary income and carry forward remaining losses.
What’s the IRS rule on wrapped tokens for tax reporting?
The IRS generally treats wrapping tokens as a taxable crypto-to-crypto transaction. It may result in a capital gain or loss based on the difference between the original asset’s cost basis and its fair market value at the time of wrapping. Report this transaction accordingly.
How does the IRS treat DeFi lending or borrowing?
If you earn interest or receive tokens through DeFi lending, it is considered taxable income. Borrowing, on the other hand, may trigger capital gains if it involves token swaps. It’s important to track these events and report them using the appropriate IRS forms.
Do I need to track cost basis separately for each wallet?
Yes. From 2025, the IRS will require wallet-level cost basis tracking. You must maintain records for each account or wallet, including purchase price and asset-specific transaction history, rather than combining everything into a single portfolio-wide calculation.
