Changes to Crypto Tax Reporting Starting FY2025

Over the past years, the Internal Revenue Service (IRS) has increased its surveillance to trace and prevent cryptocurrency tax fraud. The IRS treats cryptocurrencies as property. Cryptocurrency transactions are subject to capital gains tax, sharing tax consequences favorable to stocks and real estate. Here are some updates and reminders on the crypto asset tax framework…

Starting the 2025 tax year, brokers are required to report the sale of a crypto asset if proceeds are held in a taxable account. The reporting form, Form 1099-DA, will be sent to individual taxpayers and the IRS in early 2026.

Notice 2024-57 guidance provides reporting scope for brokers and limits the disclosing of the following transactions via Form 1099-DA:

-Wrapping and unwrapping transactions
-Liquidity provider transactions
-Staking transactions
-Lending of digital assets
-Short sales
-Notional principal contract transactions

Upcoming changes are in efforts to combat poor crypto transaction reporting standards and to improve the integrity of the U.S. financial markets.

Reminder
Under the annual gift tax exclusion, you can gift up to $18,000 of crypto to any individual tax-free annually, this may not exceed the lifetime estate and gift tax exemption of $13.61 million. As for charitable contributions, donating crypto assets to philanthropic donations, similar to stocks and other property, can get a tax deduction for the donation’s fair market value.

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