Crypto Taxes in US: IRS Enforces Property Classification, 2025 Changes Ahead

Cryptocurrency has surged in popularity in the United States, with millions of individuals and businesses engaging in buying and trading despite the evolving regulatory landscape. The Trump administration's pro-crypto policies have further boosted its adoption, although stringent tax laws remain in place. Understanding these tax regulations is crucial for individuals and companies to ensure compliance and avoid potential legal issues in this rapidly changing market. The Internal Revenue Service (IRS) is the primary authority overseeing crypto taxation, ensuring it aligns with U.S. financial laws.

The IRS manages the country's tax system, including crypto taxes. Since 2014, it has classified crypto as property rather than currency, as outlined in Notice 2014-21. This classification continues in 2025, supported by new regulations from the 2021 Infrastructure Investment and Jobs Act. Brokers are now required to report crypto transactions, and the Commodity Futures Trading Commission (CFTC) monitors certain assets as commodities. The IRS collaborates with the Treasury and FinCEN to enforce these rules, while the Securities and Exchange Commission (SEC) takes a more hands-off approach under the pro-crypto government.

In the United States, there are several types of crypto taxes. Capital Gains Tax (CGT) is levied on profits from selling or trading crypto, based on the holding period. Income tax is applied to crypto earned from activities such as mining, staking, airdrops, or payments. Sales tax varies by state, with some treating crypto as cash for purchases while others exempt it. There is no federal wealth tax, but crypto in estates may be subject to inheritance tax.

Tax rates and brackets for crypto in the United States are as follows: Individuals pay short-term CGT ranging from 10% to 37% on crypto held for less than a year, matching income tax rates. Long-term CGT ranges from 0% to 20% for crypto held over a year, based on income. Businesses face a 21% corporate income tax on crypto profits. Income tax on crypto earnings ranges from 10% to 37%, depending on yearly income. Exemptions include a $19,000 gift tax exclusion per recipient, and losses can offset gains.

Crypto transactions are subject to various tax treatments. Buying crypto is not taxed, but selling triggers CGT on profits. Crypto mining and staking rewards are counted as income and taxed at their value upon receipt. Crypto received as salary or payment is taxed as income at its fair market value when received. Crypto-to-crypto trades are taxable as CGT based on the value at the time of the trade. Earnings from DeFi, lending, and yield farming are considered income and taxed at receipt. Profits from NFT transactions face CGT, and income from creating NFTs may also be taxed.

Taxpayers must report their crypto activities to the IRS annually. Individuals use Form 8949 and Schedule D for gains, and Schedule 1 or C for income. Businesses file via corporate returns. Starting in 2025, brokers will report sales on Form 1099-DA, including proceeds. Taxpayers must keep detailed records of dates, values, and amounts, often from personal logs or exchanges. Deadlines are April 15 for individuals and March 15 for companies, with extensions available to October 15. Non-compliance can result in fines or audits, with the IRS using blockchain tracking to monitor compliance.

Tax deductions and exemptions for crypto include the ability to offset losses from crypto sales against gains, reducing the tax owed, with up to $3,000 deductible against other income yearly. Businesses may deduct crypto-related expenses if they are tied to legal operations. Donations to charities are exempt if appraised at over $5,000. There are no broad crypto-specific exemptions, but the $15,000 standard deduction for singles ($30,000 for joint filers) applies broadly in 2025.

The IRS monitors crypto activities through blockchain analysis, exchange data, and Know Your Customer (KYC) rules, with intensified efforts in 2025. It collaborates with FinCEN and global tax bodies to trace offshore holdings. Penalties for tax evasion start at 20% of unpaid tax, rising to 75% for fraud. Audits may freeze assets, and jail time is possible for major violations. With stricter broker reporting, compliance has become more critical than ever.

By late 2025, tax rules may ease as Trump’s pro-crypto policies unfold, such as the Strategic Bitcoin Reserve. Broker reporting will expand in 2026 to include cost basis, simplifying filings. No retail Central Bank Digital Currency (CBDC) is planned, but global frameworks like the OECD’s may push for clearer rules. Tax incentives could emerge for blockchain firms, balancing innovation with oversight.

In conclusion, the U.S. taxes crypto as property, with CGT on profits and income tax on earnings, enforced by the IRS. Compliance requires careful record-keeping and timely filings to avoid steep penalties. As policies shift, taxpayers should stay informed and seek expert advice to navigate this evolving field safely.