Tax Reporting for Crypto: What You Need to Know

When working with Tax Reporting, the process of calculating and filing tax obligations on cryptocurrency transactions. Also known as crypto tax filing, it helps individuals stay compliant with tax authorities and avoid costly penalties.

One of the biggest hurdles is gathering the right data. Form 1099‑DA, the new IRS form that captures digital‑asset distributions forces you to list every airdrop, staking reward, and gifted coin. If you don’t have a clear record, the form becomes a nightmare. That’s why tax reporting starts with accurate transaction logs—every buy, sell, swap, or transfer feeds the numbers you’ll later report.

Key Elements of Crypto Tax Reporting

Accurate Cost Basis, the original value of a crypto asset adjusted for fees and splits calculation is the foundation of any tax return. Without a reliable cost basis, you can’t tell whether a trade is a gain or a loss, and the IRS will default to the highest possible taxable amount. Most wallets don’t calculate this automatically, so you’ll need a dedicated tracker or spreadsheet.

Another piece of the puzzle is Gift and Inheritance Reporting, the rules that apply when you give or receive crypto as a gift or part of an estate. In 2025 the IRS introduced Form 1099‑DA requirements for gifts over $16,000 and new thresholds for inherited tokens. Ignoring these can trigger an audit, because the agency now cross‑checks blockchain addresses against reported gift amounts.

These elements are tightly linked: accurate cost basis supports proper gain/loss reporting, which in turn feeds the figures you’ll place on Form 1099‑DA. Meanwhile, any crypto you receive as a gift must be assigned a fair market value at the time of transfer, which becomes its cost basis for future disposals.

Beyond the paperwork, the choice of tools matters. Some platforms offer built‑in tax reports that pull data directly from on‑chain activity, while others require you to export CSV files and import them into a tax calculator. The right tool can automate the generation of Form 1099‑DA, calculate cost basis using FIFO or LIFO methods, and even flag potential gift‑tax events.

Regulatory changes also shape how you approach reporting. The 2025 guidance clarified that DeFi yield farming rewards count as ordinary income at the moment they’re earned, not when you sell them. This means you need to record the USD value of each reward on the day it lands in your wallet, adding another layer to the cost‑basis spreadsheet.

For traders who hop between centralized exchanges (CEX) and decentralized exchanges (DEX), the situation gets trickier. Each venue may issue its own 1099‑K or 1099‑B, but DEXs often don’t provide any tax documents. That’s why many crypto‑savvy filers consolidate all activity into a single tax‑software dashboard, ensuring nothing falls through the cracks.

Don’t forget about staking and liquidity provision. When you lock tokens in a pool, the rewards you earn are taxable as they accrue, while the underlying assets retain their original cost basis. If you later withdraw the pool tokens, you’ll need to calculate a combined gain that includes both the base assets and the accrued rewards.

International users face additional complexity. Some jurisdictions treat crypto as property, others as currency, and a few have no clear rules at all. In the U.S., the IRS treats it as property, which aligns with the need for cost‑basis tracking. If you’re a U.S. citizen living abroad, you still owe taxes on worldwide crypto activity and must report foreign wallets on FBAR and FATCA forms.

Finally, keep an eye on audit‑ready documentation. Screenshots of wallet balances, transaction hashes, and exchange statements all serve as evidence if the IRS asks for proof. Storing these records for at least seven years is a good safety net.

Now that you understand the moving parts—Form 1099‑DA, cost basis, gift and inheritance rules, and the tools that tie them together—you’re ready to see how these topics play out in real‑world examples. Below you’ll find a curated list of articles that break down each concept, walk you through step‑by‑step setups, and show common pitfalls to avoid.