How to File Crypto Taxes: Step-by-Step Guide

How to File Crypto Taxes: Step-by-Step Guide

If you sold, traded, or earned cryptocurrency in 2025, you need to report it to the IRS. Figuring out how to file crypto taxes can feel overwhelming, especially if you used multiple wallets or exchanges throughout the year. This guide walks you through every step, from gathering your transaction history to submitting your return.

Quick Answer

You file crypto taxes by reporting your capital gains and losses on Form 8949 and Schedule D, and any crypto income on Schedule 1 or Schedule C. Every taxable event, including selling crypto for cash, swapping one token for another, and earning crypto through staking or mining, must be reported. You'll also need to answer the digital asset question on the front page of Form 1040. The filing deadline for the 2025 tax year is April 15, 2026.

Step 1: Gather Your Full Transaction History

Before you calculate anything, you need a complete record of every crypto transaction you made during the 2025 tax year. This includes buys, sells, trades, transfers, staking rewards, airdrops, mining income, and payments received in crypto.

Here's what to do:

1. Download transaction records from every exchange. Log into each exchange you used (Coinbase, Kraken, Binance.US, etc.) and export your full transaction history as a CSV file. Most exchanges provide this under a "Tax Reports" or "Statements" section.

2. Collect on-chain transaction data. If you used DeFi protocols, DEXs, or self-custody wallets, your transactions won't appear on any exchange. You'll need to pull data from blockchain explorers or use a crypto tax tool that can read wallet addresses directly.

3. Account for every wallet and chain. If you moved crypto between wallets, those transfers aren't taxable, but they affect your cost basis tracking. Missing a transfer can cause your tax software to treat received crypto as having zero cost basis, which inflates your gains.

Example: You bought 1 ETH on Coinbase for $2,000 and transferred it to MetaMask. If your tax tool only sees the MetaMask side, it might assign a $0 cost basis. When you later sell that ETH for $3,500, you'd incorrectly report a $3,500 gain instead of a $1,500 gain.

For a broader overview of what triggers a taxable event, see our complete guide to crypto taxes.

Step 2: Choose Your Cost Basis Method

Your cost basis method determines which coins are "sold first" when you dispose of crypto. This directly affects how much gain or loss you report. The IRS allows several methods, and the one you choose can significantly change your tax bill.

The three most common methods are:

Example: You bought 1 BTC at $20,000 in January and another 1 BTC at $60,000 in October. In December, you sell 1 BTC for $65,000.

• FIFO: You sold the January BTC. Gain = $65,000 - $20,000 = $45,000 (long-term if held over a year).
• LIFO: You sold the October BTC. Gain = $65,000 - $60,000 = $5,000 (short-term).
• HIFO: You sold the October BTC (highest cost). Gain = $65,000 - $60,000 = $5,000 (short-term).

Whichever method you pick, you must apply it consistently. For a deeper comparison, read our guide on FIFO vs LIFO vs HIFO.

Step 3: Calculate Your Capital Gains and Losses

Once you've matched each sale with its cost basis, you can calculate your gain or loss on every transaction. The formula is straightforward:

Gain or Loss = Proceeds - Cost Basis - Fees

You need to classify each gain or loss as either short-term or long-term:

• Short-term: Held for one year or less. Taxed at your ordinary income rate.
• Long-term: Held for more than one year. Taxed at preferential capital gains rates.

2025 Long-Term Capital Gains Tax Rates

Short-term gains are added to your ordinary income and taxed at your marginal tax bracket, which can be as high as 37% for the 2025 tax year.

Example: You sold SOL tokens you held for 8 months and realized a $10,000 gain. If your ordinary income puts you in the 24% tax bracket, that $10,000 is taxed at 24%. If you'd held those tokens for 13 months instead, the same gain might be taxed at 15% or even 0%.

If you had losses during the year, those can offset your gains. You can also deduct up to $3,000 in net capital losses against ordinary income and carry the rest forward to future years. Our guide on how to report crypto losses covers this in detail.

Step 4: Fill Out Form 8949

Form 8949 is where you report each individual crypto transaction. The IRS uses this form to reconcile what you report with the information they receive from exchanges through Forms 1099-B and the new Form 1099-DA.

Here's how to complete it:

1. Choose Part I or Part II. Part I is for short-term transactions (held one year or less). Part II is for long-term transactions (held more than one year).

2. Select the correct checkbox (A, B, or C). At the top of each section, you'll check one of three boxes:

• Box A: Basis was reported to the IRS (you received a 1099 with cost basis).
• Box B: Basis was NOT reported to the IRS (you received a 1099 without cost basis).
• Box C: You did not receive a 1099 at all.

Most crypto traders will check Box C for the majority of their transactions, though this is changing as exchanges begin issuing 1099-DA forms.

3. Fill in each row. For every transaction, you'll enter:

• (a) Description of property (e.g., "2.5 ETH")
• (b) Date acquired
• (c) Date sold or disposed
• (d) Proceeds (sale price)
• (e) Cost basis
• (g) Adjustments (if any)
• (h) Gain or loss

If you have hundreds of transactions, you can attach a summary statement and enter the totals on Form 8949. Many crypto tax tools generate a Form 8949 PDF that you can submit directly.

For a complete walkthrough, see our Form 8949 for crypto guide.

Step 5: Transfer Totals to Schedule D

Schedule D (Form 1040) is where your totals from Form 8949 flow. This form separates your short-term and long-term results and calculates your overall capital gain or loss for the year.

1. Enter short-term totals on Part I of Schedule D. Pull the total proceeds, cost basis, and gain/loss from Part I of your Form 8949.

2. Enter long-term totals on Part II of Schedule D. Pull the totals from Part II of Form 8949.

3. Complete Part III. Schedule D Part III combines your short-term and long-term results into a single net capital gain or loss figure. This number flows to Line 7 of your Form 1040.

If your only capital gains activity was crypto, Schedule D is relatively straightforward. If you also sold stocks, bonds, or real estate, those go on the same Schedule D alongside your crypto.

Step 6: Report Crypto Income on Schedule 1 or Schedule C

Not all crypto tax events are capital gains. Some are treated as ordinary income:

• Staking rewards are taxed as income at the fair market value when received.
• Mining income is taxed as income. If mining is your trade or business, report it on Schedule C.
• Airdrops are taxed as income at the fair market value when you gain control of the tokens.
• Payment for goods or services received in crypto is ordinary income.
• Interest earned through lending platforms is ordinary income.

If these activities aren't part of a trade or business, report the income on Schedule 1, Line 8 (Other Income). If you're mining or earning crypto as a self-employed individual, use Schedule C and you'll also owe self-employment tax (15.3% on net earnings).

Example: You staked ETH and earned 0.5 ETH in rewards over the year. At the time each reward was received, ETH was worth $3,200. Your total staking income is 0.5 x $3,200 = $1,600, reported as ordinary income. When you later sell that 0.5 ETH, your cost basis is $1,600.

Step 7: Answer the Digital Asset Question on Form 1040

Since 2019, the IRS has included a question about digital assets on the front page of Form 1040. For the 2025 tax year, the question reads:

"At any time during 2025, did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, gift, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?"

You must answer Yes or No. Answer "Yes" if you did any of the following:

• Sold crypto for USD or another fiat currency
• Traded one crypto for another
• Received crypto as payment for services
• Received staking or mining rewards
• Received an airdrop
• Made a gift of crypto
• Disposed of crypto in any other way

You can answer "No" if your only activity was buying crypto with fiat and holding it, or transferring crypto between your own wallets.

Leaving this question blank is not an option. The IRS treats a blank response the same as not filing a complete return.

Filing Deadlines for 2025 Crypto Taxes

Filing an extension gives you more time to file, but it does not give you more time to pay. If you owe taxes and don't pay by April 15, you'll face a failure-to-pay penalty of 0.5% per month plus interest.

If you expect a refund, there's no penalty for filing late, but you won't receive your refund until the IRS processes your return.

Common Crypto Tax Filing Mistakes

Filing crypto taxes correctly requires attention to detail. Here are the most frequent errors the IRS sees:

1. Forgetting to report small transactions. Every taxable event counts, even a $5 swap on a DEX. The IRS receives data from exchanges, and discrepancies between what you report and what they know about can trigger a notice.

2. Using zero cost basis by mistake. If you don't import all your wallets and exchanges, your tax software may default to a $0 cost basis for tokens it can't trace. This inflates your reported gains significantly.

3. Double-counting transfers as taxable events. Moving crypto from one wallet to another is not a taxable event. If your software treats a transfer as a sale and a new purchase, you'll overstate your gains.

4. Mixing up short-term and long-term holding periods. The one-year threshold is based on the exact dates of acquisition and disposal. Selling one day too early can mean the difference between a 15% rate and a 37% rate.

5. Not reporting crypto income. Staking rewards, airdrops, and mining income are taxable when received. Some taxpayers only report sales and forget about income events entirely.

6. Ignoring DeFi activity. Liquidity pool deposits, yield farming, token swaps on DEXs, and bridge transactions can all create taxable events. If you used DeFi in 2025, make sure those transactions are captured.

7. Missing the deadline and not filing an extension. The failure-to-file penalty (5% per month, up to 25%) is ten times higher than the failure-to-pay penalty. If you can't finish on time, file Form 4868.

For more on how different tax rates apply, see our breakdown of crypto tax rates.