The IRS is changing how you report your Bitcoin and other digital coins on your tax returns. Starting in 2025, new rules will make tracking your crypto much stricter. If you’ve been buying, selling, or trading digital assets, get ready for some paperwork.
These new rules are part of the government’s plan to make sure crypto users pay their fair share of taxes. The IRS believes many people aren’t reporting their digital asset gains correctly. Some might not know they need to, while others could be trying to hide their profits.
“Cryptocurrency isn’t invisible money anymore,” says Dana Johnson, a tax specialist at CryptoTax Advisors. “The days of digital assets flying under the radar are ending with these new reporting requirements.”
The biggest change? Digital wallets and exchanges like Coinbase and Binance must now report your transactions directly to the IRS. Before, they only had to report if you made a certain number of transactions worth over $20,000. Now, virtually all crypto movements will be tracked.
NFTs (those digital art pieces and collectibles) are specifically mentioned in the new rules. The IRS now classifies them as reportable digital assets. This means if you sold an NFT for more than you paid, you owe taxes on that profit.
Many crypto users are worried about these changes. A recent survey from Blockchain Association showed 68% of cryptocurrency owners don’t fully understand how to report their holdings on tax forms. Even more concerning, about 40% didn’t know they needed to report certain transactions at all.
The new rules make crypto exchanges send you a form called a 1099-DA. This form shows all your digital asset transactions for the year. The IRS gets a copy too, so your numbers better match.
“Think of it like the forms you get from your stock broker or bank,” explains Miguel Torres, founder of CryptoClarity. “The government will now have a record of your crypto activity, just like they do with traditional investments.”
If you use DeFi (decentralized finance) platforms or self-hosted wallets, reporting gets trickier. The IRS expects you to keep your own records for these transactions since they don’t have a central company that can report for you.
Bitcoin miners face special rules too. Any coins you mine count as income right away – even if you don’t sell them. You’ll pay taxes based on the value of the coins when you received them.
For everyday crypto users, here’s what you need to do:
- Keep detailed records of all transactions – dates, amounts, and values in dollars.
- Save statements from all platforms where you buy or sell digital assets.
- Use crypto tax software like CoinTracker or TaxBit to help organize everything.
- Consider talking to a tax professional who understands cryptocurrency.
“The biggest mistake people make is waiting until April to figure this out,” warns Johnson. “Start tracking now, because rebuilding a year’s worth of crypto activity is nearly impossible.”
For parents with kids dabbling in digital assets, these rules apply to them too. If your teenager sold NFTs or traded crypto, they might need to file taxes, even at a young age.
The penalties for not reporting correctly can be severe. The IRS can charge up to 25% of unpaid taxes as a penalty, plus interest. In serious cases of tax evasion, criminal charges are possible.
Some crypto enthusiasts see these changes as a sign the government is finally taking digital assets seriously. “Regulation isn’t always bad news,” says Torres. “Clear tax rules mean crypto is becoming a normal part of the financial system.”
Others worry the complex rules might push people away from using cryptocurrency altogether. The Blockchain Association has been pushing for simpler reporting standards
