Crypto Taxes in 2025: Overview

Let’s be real, crypto still feels like the Wild West. There’s gold to be mined, fortunes to be made, and chaos around every corner. But just when you thought you were flying under the radar with your crypto gains, the IRS shows up like the sheriff in town... and they want a cut of your treasure.

The problem? Most people overpay because they don’t know the rules—or the smart, legal ways to pay less. But good news: that’s what we’re here for.

Whether you’re buying, selling, trading, mining, staking, or even tipping your favorite influencer in crypto, taxes are part of the deal. The IRS is cracking down harder than ever, and “I didn’t know” won’t save you from penalties.

Let’s walk you through how to keep more of your coins while staying compliant.

Taxable Crypto Events: What Makes the IRS Pay Attention

Here’s when the IRS wants a piece of the action:

• Selling Crypto for Cash: Turn your Bitcoin into dollars? That’s a sale, and any profit is taxable.

• Trading One Coin for Another: Swap ETH for SOL? The IRS treats it like you sold ETH for cash, then bought SOL. Boom—taxable.

• Using Crypto to Buy Stuff: That hotel stay, car, or even burrito you bought with crypto? You just triggered a taxable event.

• Earning Crypto (Mining, Staking, Freelancing): The second it hits your wallet, the IRS sees that as income. You don’t have to sell it—they already consider it taxable.

Good news: Just holding crypto isn’t taxable. So if you're a patient HODLer, sit back and relax (for now).

Be Patient: The IRS Rewards Long-Term HODLers (say what??)

The term "HODL" originated as a misspelling of "HOLD" in an online post by an early Bitcoin investor. While the misspelling is the origin, "HODL" has evolved to mean "hold on for dear life".  Hodlers are characterized by their patience and belief in the long-term growth of cryptocurrencies, choosing to hold their assets rather than engage in frequent trading. 

If you’ve held your crypto for more than a year before selling, congratulations—you’ve unlocked long-term capital gains rates. Translation? Lower taxes. 🙌

• Short-Term (Held ≤ 1 year): Taxed like regular income—up to 37%.

• Long-Term (Held > 1 year): Taxed at 0%, 15%, or 20%, depending on your income.

Pro tip: If you’re close to that one-year mark, it may be worth holding a little longer to save a lot in taxes.

Turn Losses into Tax Savings (Tax-Loss Harvesting FTW)

Not every crypto investment hits the moon—and that’s okay. Losses can actually help you. If you sell at a loss, you can use that to offset your gains.

Let’s say:

• You made $10k on Bitcoin

• You lost $5k on Ethereum

Sell the ETH, and now the IRS only taxes you on $5k instead of $10k. If your losses outweigh gains, you can even deduct up to $3,000 from your regular income—and roll over the rest for future years.

Heads-up: The “wash sale” rule doesn’t currently apply to crypto, but it could soon. So play smart, not sneaky.

Extra Moves to Save Big on Crypto Taxes

Here’s how the pros (and now, you) keep more money in their wallets:

• Move to a Tax-Friendly State

Live in a high-tax state? Your crypto might be losing more to state taxes than volatility. States like Texas, Florida, and Wyoming don’t have income tax. If you’ve got major

gains, moving could save you serious cash.

• Use a Self-Directed IRA (SDIRA)

Invest in crypto through a Roth SDIRA = tax-free growth + no taxes when you retire. Traditional SDIRA = tax-deferred until retirement. Either way, smart move.

• Gifting Crypto to Family

In 2025, you can give up to $19,000 per person (or $38,000 as a couple) without triggering a taxable event. That's one way to share the wealth and avoid taxes at the same time.

• Donate to Charities

Feeling generous? Donate appreciated crypto to a qualified charity and:

• Avoid capital gains taxes

• Deduct the fair market value

Talk about a win-win!

• Borrow Instead of Sell

Need cash? Don’t sell—borrow against your crypto. No capital gains taxes, and you still benefit if your crypto keeps rising. Bonus: loan interest might even be deductible.

Keep Killer Records (Yes, It Matters)

Crypto can be messy. Wallets, exchanges, DeFi, NFTs... it adds up. The IRS is watching, and they’re not playing around.

Make sure to:

• Use crypto tax software (like CoinLedger, Koinly, or CoinTracker)

• Track every buy, sell, trade, and gift

• Know your cost basis and holding periods

• File using Form 8949 and Schedule D

Don’t DIY—Work with a Crypto-Savvy Tax Pro

Look, crypto taxes are tricky—and the rules are changing constantly. Don’t risk overpaying or getting penalized for missing a detail; contact a tax professional who has the tools and know-how to keep you compliant and save you money.

Disclaimer: This blog is for informational purposes only and does not constitute legal, tax, or financial advice. Cryptocurrency tax laws are complex and subject to change. Always consult with a qualified tax professional before making decisions based on your specific circumstances.