Crypto Gift and Inheritance Reporting: 2025 Compliance Checklist

Imagine your loved one’s crypto stash sitting in a cold wallet, only to become a legal nightmare when you try to claim it. The good news? 2025 brings clear rules that, if you understand them now, can save you time, money, and sleepless nights. This guide walks you through every reporting obligation for crypto gifts and inheritances, shows how the new Form 1099‑DA reshapes the game, and gives a step‑by‑step plan to stay compliant.

Key Takeaways

• From Jan12025, crypto inheritance reporting must follow the same estate‑tax rules as stocks or real estate.
• Form 1099‑DA becomes mandatory for all broker‑facilitated digital‑asset trades in 2025; the first copies reach taxpayers in early2026.
• Cost‑basis tracking shifts to a wallet‑by‑wallet method - you can’t lump all coins together.
• State inheritance taxes vary widely; Washington imposes 10‑20% on estates over $2.193M.
• Professional tax advice is essential for accurate basis calculation and secure key transfer.

Understanding the Reporting Landscape

At the heart of the new regime is the Internal Revenue Service (IRS), the U.S. tax authority that treats cryptocurrency as property rather than currency. Because crypto is property, every gift or inheritance triggers the same reporting and tax rules that apply to stocks, bonds, or real estate.

The private‑key system adds a layer of complexity. While legal ownership can be transferred on paper, true control rests with whoever holds the private key. This means estate planners must address both the legal title and the technical key hand‑off to avoid disputes or accidental loss.

New 2025 Reporting Forms

Two forms dominate the new reporting calendar:

• Form 1099‑DA, Digital Asset Proceeds from Broker Transactions - required for every crypto trade executed through a broker for U.S. taxpayers starting Jan12025. The form reports gross proceeds, transaction date, fair market value (FMV) at the time of trade, and broker identification.
• Form 1099‑S, the existing real‑estate settlement statement now expanded to include FMV of digital assets used as consideration - relevant when crypto pays for property after Jan12025.

The first 1099‑DA statements will be mailed to taxpayers and the IRS in early 2026, covering all 2025 activity. That compressed timeline forces anyone with crypto trades in 2025 to have clean, up‑to‑date records today.

Wallet‑by‑Wallet Cost Basis Accounting

Before 2025, investors could use a “universal accounting method,” treating all holdings as one pool. The new rule forces a wallet‑by‑wallet, method that requires separate cost‑basis tracking for each crypto wallet. Why does this matter for heirs?

1. Each wallet may have a different acquisition date, purchase price, and transaction history.
2. When a wallet is inherited, the heir’s basis is the fair market value on the decedent’s date of death, not the original purchase price.
3. Mixing wallets would now produce inaccurate gain/loss calculations and could trigger IRS penalties.

Practically, this means you need a spreadsheet (or tax software) that records:

• Wallet address
• Date of each inbound/outbound transaction
• FMV in USD at the moment of each transaction
• Resulting cost basis after every addition or subtraction

Many brokers are developing a broker‑to‑broker communication system similar to stock transfers, but until that’s universal, manual tracking remains the rule of thumb.

Gift vs. Inheritance Tax Rules

Both gifts and inheritances are subject to the same federal estate‑tax thresholds. The federal estate tax exemption, the amount an estate can pass tax‑free, currently sits at $12.92million for individuals in 2025. Most crypto owners fall well below this, meaning no federal tax is due.

State rules can differ dramatically. For example, Washington imposes a progressive tax of 10‑20% on estates exceeding $2.193million, while most other states follow the federal exemption. Always check the specific state where the decedent lived or owned property.

Gifts made during a lifetime trigger the annual exclusion ($17,000 per recipient in 2025). Anything above that counts against the donor’s lifetime exemption. When a gift is made in crypto, the donor must report the FMV on the date of transfer, using the same Form 1099‑DA framework if the transaction goes through a broker.

Practical Steps for Compliance

1. Inventory every wallet. List addresses, custodians, and private‑key status. Mark which wallets hold assets intended for inheritance.
2. Determine FMV at key dates. Use reputable price indices (CoinMarketCap, Bloomberg Crypto) to stamp the value on the donor’s death date or the date of each gift.
3. Calculate wallet‑specific basis. For each wallet, apply the FIFO (first‑in‑first‑out) method unless you have a documented specific‑identification strategy.
   • Record every purchase, receipt (airdrop, mining reward), and sale.
   • Adjust basis for staking rewards, forks, and airdrops as taxable events.
4. Secure the private keys. Store them in a fire‑proof safe, a hardware wallet, or a reputable escrow service that releases keys only upon verified death.
   • Consider a dual‑control system where two trusted parties each hold a fragment of the key.
5. Update estate‑planning documents. Add crypto clauses to wills, trusts, and powers of attorney that reference wallet addresses and key‑handoff procedures.
6. Engage a tax professional. A CPA familiar with digital‑asset reporting can file the required Form 8939 (Report of Assets Held in an Estate) and ensure the correct basis is reported on the heirs’ tax returns.
7. Monitor Form1099‑DA issuance. When you receive the form in 2026, reconcile it against your records. Any discrepancy could trigger an audit.

Common Pitfalls to Avoid

• Ignoring the private‑key transfer. Legal documents alone don’t move the crypto; without the key, the heir can’t access the assets.
• Pooling all wallets for basis. This will lead to mis‑reported gains when the heir sells any portion.
• Failing to report airdrops and staking rewards. The IRS treats these as ordinary income at the time received.
• Assuming the federal exemption shields you everywhere. State tax obligations can still apply.
• Delaying paperwork. The 2025 reporting rollout leaves a narrow window before the first 1099‑DA forms are generated.

Next Steps and Resources

Start today with a quick audit:

1. Gather all wallet statements from exchanges, hardware wallets, and custodial services.
2. Export CSV transaction histories and import them into a spreadsheet that includes a column for FMV at each timestamp.
3. Schedule a meeting with a tax advisor who has proven experience in digital‑asset estate planning.

Helpful references (as of Oct2025):

• IRS Notice 2025‑XX on Form 1099‑DA requirements.
• Tax Foundation report on state inheritance taxes, 2025 edition.
• Coinbase and Kraken documentation on exporting transaction histories.
• National Association of Estate Planners - guidance on crypto clauses.

By getting organized now, you’ll avoid a scramble when the first 1099‑DA arrives and ensure that your loved ones receive the full value of the crypto you’ve built.