How to Handle Crypto Transactions on Your Tax Return

CryptoPhilly Podcast

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How to Handle Crypto Transactions on Your Tax Return

The No-Fluff Guide for Staying Compliant While Protecting Your Crypto Bags

CoinFlask

Jun 30, 2025

Transcript

If you bought, sold, staked, swapped, or received crypto in 2024, this post is your lifeline. The IRS isn’t sleeping on blockchain tech — and every transaction you make could trigger a taxable event.

Whether you're a casual trader or a full-on DeFi degen, here's how to handle your crypto transactions on your tax return without losing your mind (or your refund).

Crypto Is Taxable — Here’s How

Let’s clear up the biggest misconception first:

Crypto is not treated as currency — it’s treated as property.
This means every time you do something with it — sell, trade, spend, or earn — the IRS wants to know.

The IRS does tax the following:

Selling crypto for fiat (USD, EUR, etc.)
Trading one crypto for another (like BTC → ETH)
Spending crypto on products or services
Receiving crypto through airdrops, staking, mining, or getting paid in it

The IRS doesn’t tax these:

Buying crypto with fiat
Moving crypto between your own wallets
Simply HODLing your crypto

But you still need records for everything.

Capital Gains vs. Income: Know What You Owe

There are two main types of taxes you’ll face with crypto.

1. Capital Gains Tax

Triggered when you sell or trade your crypto.

Short-term (held < 1 year): taxed like income
Long-term (held > 1 year): lower rates (0%, 15%, or 20%)

You pay tax on the gain — that’s the difference between what you paid and what you sold it for.

2. Ordinary Income Tax

Applies when you earn crypto.

Includes staking rewards, airdrops, mining, or being paid in crypto
Taxed based on the value (in USD) at the time you received it

Pro tip: If you auto-stake or re-invest rewards, that can trigger multiple taxable events.

Track Every Transaction (Or Regret It Later)

Crypto transactions are spread across exchanges, wallets, and chains — making it easy to lose track. But poor recordkeeping is a recipe for IRS headaches.

Here’s what you must track:

Date of transaction
Type of transaction
Asset involved
Fair market value in USD at the time
Cost basis and gain/loss

Doing this manually? Nightmare fuel.

That’s why I recommend using crypto tax tools like:

🔹 CoinLedger – Automatically syncs with wallets and exchanges, calculates gains, and generates IRS-ready forms.
🔹 Koinly – Clean dashboard and supports DeFi, NFTs, and even mining/staking income.

These platforms save you hours — and in some cases, thousands in errors.

Where to Report Crypto on Your Tax Return

Let’s get practical. Here’s where your crypto activity shows up when you file:

Crypto Activity IRS Form Trades, sales, swaps Form 8949 + Schedule D Airdrops, mining, staking rewards Schedule 1 (for hobby income) or Schedule C (for business income) Getting paid in crypto Schedule C + Self-employment tax

Also, don’t forget:
The IRS now asks every taxpayer: “Did you receive, sell, or dispose of digital assets?”
Say “no” and get caught later = serious consequences.

What If You Lost Money?

Bear market blues? Here’s the upside:

You can deduct capital losses to offset gains and even reduce your regular income by up to $3,000 per year. If your losses are bigger than that, you can carry them forward into future years.

Right now, the wash sale rule doesn’t apply to crypto — meaning you can sell at a loss and buy back immediately. But this could change soon, so stay alert.

Final Tips for Filing Crypto Taxes Like a Pro

Let’s wrap up with a few essentials:

✅ Use crypto-native tax software like CoinLedger or Koinly
✅ Store your keys safely with a hardware wallet like Trezor or Ledger
✅ Keep track all year — not just at tax time
✅ Work with a crypto-savvy CPA if you’re active in DeFi or run a Web3 business
✅ Be honest. The blockchain is public. The IRS has eyes.

Final Word

Crypto taxes aren’t going away. In fact, they’re becoming more regulated, not less.

If you’re serious about building wealth in crypto, treating your taxes like a pro is non-negotiable. Automate what you can. Use the right tools. And stay compliant while everyone else is sweating through last-minute spreadsheets.