Crypto Taxation in the United States: A Complete Guide

Cryptocurrency has taken off in the United States, with millions buying and trading it despite changing rules. In 2025, the Trump administration’s crypto-friendly push has boosted its use, though tough tax laws still apply. Knowing these laws helps people and companies follow them and avoid trouble in a fast-moving market. The Internal Revenue Service (IRS) is in charge of crypto taxes, keeping them in line with U.S. financial laws.

Tax Authorities & Regulations

The IRS runs the country’s tax system, including crypto taxes. Since 2014, it has treated crypto as property, not money, per Notice 2014-21. This continues in 2025, backed by new rules from the 2021 Infrastructure Investment and Jobs Act. Brokers now report crypto deals, and the Commodity Futures Trading Commission (CFTC) watches some assets as commodities. The IRS teams up with the Treasury and FinCEN to ensure rules are followed, while the SEC steps back under a pro-crypto government.

Types of Crypto Taxes in the United States

• Capital Gains Tax (CGT) – Levied on profits from selling or trading crypto, based on holding period.
• Income Tax – Applied to crypto earned from mining, staking, airdrops, or payments.
• Sales Tax – Varies by state; some treat crypto as cash for purchases, others exempt it.
• Other Taxes – No federal wealth tax exists, but crypto in estates may face inheritance tax.

Tax Rates & Brackets

• Individuals pay short-term CGT (10% to 37%) on crypto held under a year, matching income tax rates.
• Long-term CGT (0%, 15%, or 20%) applies to 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; losses can offset gains.

Crypto Transactions & Tax Treatment

• Buying and selling crypto – Buying isn’t taxed; selling triggers CGT on profits.
• Crypto mining and staking – Rewards count as income, taxed at receipt value.
• Crypto as salary or payment – Taxed as income at fair market value when received.
• Crypto-to-crypto trades – Taxable as CGT, based on value at trade time.
• DeFi, lending, and yield farming – Earnings are income, taxed at receipt.
• NFT transactions – Sales profits face CGT; creation income may be taxed.

Crypto Tax Reporting & Compliance

Taxpayers must report crypto to the IRS yearly. Individuals use Form 8949 and Schedule D for gains, and Schedule 1 or C for income. Businesses file via corporate returns. Starting 2025, brokers report sales on Form 1099-DA, including proceeds. Records—dates, values, and amounts—must be kept, often from personal logs or exchanges. Deadlines are April 15 for individuals and March 15 for companies, with extensions to October 15. Non-compliance risks fines or audits, heightened by IRS blockchain tracking.

Tax Deductions & Exemptions

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

Enforcement & Penalties for Non-Compliance

The IRS monitors crypto via blockchain analysis, exchange data, and KYC rules, intensified in 2025. It collaborates with FinCEN and global tax bodies to trace offshore holdings. Penalties for evasion start at 20% of unpaid tax, rising to 75% for fraud, per IRS guidelines. Audits may freeze assets, and jail time looms for major violations. With stricter broker reporting, compliance is more critical than ever.

Future of Crypto Taxation in the United States

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

Conclusion

The U.S. taxes crypto as property, with CGT on profits and income tax on earnings, enforced by the IRS. Compliance demands careful records and timely filings to dodge steep penalties. As policies shift, taxpayers should stay informed and seek experts to navigate this evolving field safely.

FAQs

1. In the United States is cryptocurrency is legal?
   According to US cryptocurrency rules and regulations, it is not treated as legal tender, but can be used as a trading digital asset to buy and sell under proper guidance. 

2. How much percentage is taxed on cryptocurrency upon gains through selling crypto in the United States?
   The Tax percentage ranges based on capital gains. On short-term gains at 10% to 37%, and long-term it is at 0% to 20%, based on income and holding time.

3. Does the US allow traders to mine cryptocurrency?
   Yes, cryptocurrency mining is legal and is used to get rewards that are taxed as income at their value when received, ranging from 10% to 37%.

4. Must businesses report cryptocurrency transactions to the IRS?
   Yes, businesses report crypto dealings annually on corporate tax returns, detailing gains and income.

5. What happens if cryptocurrency taxes are not paid in the United States?
   The IRS may impose penalties from 20% to 75% of unpaid tax, conduct audits, or seize assets in severe cases.