Cryptocurrency has gone mainstream, and so has the IRS’s interest in how you report your crypto transactions. Whether you’re trading Bitcoin, earning Ethereum rewards, or buying NFTs, crypto activities may trigger tax obligations. Filing the correct crypto tax form is essential to stay compliant and avoid costly penalties.
What Is Cryptocurrency?
Cryptocurrency (or “crypto” for short) is a type of digital money you can use online.
Unlike regular money you keep in a bank, cryptocurrencies are not controlled by a government or any one company. Instead, they use special technology called blockchain to keep track of everything safely and securely.
Some popular types of cryptocurrency you may have heard of are:
- Bitcoin (BTC)
- Ethereum (ETH)
- Solana (SOL)
- Litecoin (LTC)
You can use crypto to buy things, invest, or even send money to someone across the world, almost like using a digital wallet.
Because cryptocurrencies can be valuable (just like stocks or real estate), the IRS sees them as taxable, meaning you need to report certain crypto activities when you file your taxes.
What Types of Cryptocurrency Transactions Are Taxable?
Not everything you do with crypto will cause taxes, but a lot of common activities can.
- Selling Crypto for Cash: If you sell your crypto (like Bitcoin or Ethereum) for U.S. dollars, you might have made money, and you need to report that.
- Trading One Crypto for Another: If you swap one type of crypto for another (like trading Bitcoin for Ethereum), the IRS sees that as selling one and buying another. You’ll need to report any gains or losses.
Spending Crypto to Buy Stuff: If you use crypto to buy something (like a coffee or a new gadget), it’s still treated like a sale. Even small purchases can create a tax event. - Earning Crypto as Income: If you earn crypto by mining, staking, receiving airdropped tokens, or getting paid for freelance work in crypto, you need to report it as income on your tax return.
- Getting Crypto as a Gift: If someone gives you crypto as a gift, you don’t owe taxes right away. But if you sell that gifted crypto later, you may need to report it then.
Why Accurate Crypto Tax Reporting Matters
The IRS now views cryptocurrency as property, not currency. This classification means every crypto transaction—whether a sale, trade, or earning—could have tax consequences. If you fail to properly report your crypto activities,, you could face consequences such as:
- Penalties and Interest: Underreporting or misreporting your crypto gains can lead to penalties, interest charges, or even audits.
- Legal Consequences: In severe cases, willful non-reporting can result in criminal charges.
- Lost Refunds or Delayed Processing: Incomplete or inaccurate crypto reports can delay your tax return or prevent you from receiving owed refunds.
In short, accurate reporting protects your finances and keeps you out of legal trouble
The Most Common Crypto Tax Forms
Filing your crypto taxes isn’t just about filling out a single form. Depending on how you bought, sold, traded, or earned cryptocurrency, you might need a few different forms.
Form 8949 — Reporting Crypto Sales and Trades
Form 8949 is the heart of your crypto tax filing. Use it to report every taxable crypto event:
- Sell crypto for cash (USD)
- Trade one cryptocurrency for another
- Use crypto to buy something (like goods or services)
For each transaction, you’ll need to report:
- Date you got the crypto
- Date you sold, traded, or used it
- How much did you receive (sale proceeds)
- How much you originally paid for it (cost basis)
- Your gain or loss on the transaction
After you complete Form 8949, you’ll carry the totals over to another form called Schedule D (we’ll explain that part below).
Form 1099-B — Broker Reporting of Crypto Sales
If you traded crypto through an exchange like Coinbase, Robinhood, or PayPal, you might receive a Form 1099-B. This form helps you (and the IRS) track your:
- Total proceeds from selling crypto
- Cost basis (sometimes, not all exchanges include it)
- Any gains or losses
Always double-check the numbers. Some exchanges don’t correctly track your cost basis, and ultimately, you are responsible for making sure your tax return is accurate.
PayPal Crypto Tax Form Tip:
If you sold crypto using PayPal, you might get a PayPal Crypto Tax Form 1099-B starting with the 2023 tax year. Make sure to include this form when filing your 2025 taxes!
Form 1099-MISC — Reporting Crypto Income from Earning Activities
If you earned crypto from non-sale activities (like staking, mining, airdrops, or rewards), this income is reported on Form 1099-MISC.
Examples include:
- Staking rewards
- Airdrops (free coins!)
- Mining new coins
- Bonuses, incentives, or any other crypto payments for services
All these earnings are considered ordinary income (just like a paycheck) and need to be reported separately from any buying and selling.
Form 1040 Schedule D — Summarizing Your Crypto Gains and Losses
You’ll summarize all your gains and losses from crypto trades (and any other investments like stocks or property) here.
- If you made money overall, you’ll pay taxes on your capital gains.
- If you lost money, good news — you can deduct up to $3,000 per year against your regular income!
You’ll then transfer the final number from Schedule D into your main Form 1040 to complete your tax filing. Your net gain or loss carries over to your main Form 1040.
How to Organize Your Crypto Records for Tax Filing
Staying organized throughout the year makes crypto tax filing much easier. Here’s how:
Keep Transaction Records:
- Dates of transactions
- Amount and value (in USD) at the time of each transaction
- Type of transaction (buy, sell, trade, earn)
Download Exchange Reports:
- Use CSV exports or year-end summaries from your crypto platforms.
Track Cost Basis:
- Know how much you paid for each coin/token.
Common Mistakes to Avoid When Filing Crypto Taxes
Cryptocurrency taxes are tricky. Avoid these common pitfalls:
- Not Reporting Small Trades: Even tiny trades (like swapping tokens on Uniswap) are taxable events.
- Relying Only on Exchange Forms: Some platforms don’t capture every taxable event, especially decentralized transactions. Maintain your records.
- Mixing Income Types: Don’t lump crypto earnings (like staking rewards) with trading gains—they are taxed differently.
- Ignoring Lost or Stolen Crypto: The IRS no longer allows deductions for lost crypto due to scams or hacks (after the 2017 tax law change).
How do I report my cryptocurrency trading on my taxes?
Reporting your crypto trading may sound complicated, but it becomes manageable when you break it down step-by-step. Here’s how it works:
- Gather All Your Trade Records.
Start by collecting every record of your crypto trades from exchanges, wallets, and any crypto platforms you used.
Important details you need to collect for each trade:
- Date you acquired the crypto
- When did you sell or trade it?
- How much did you pay for it (cost basis)
- How much did you sell it for (sale proceeds)
Many exchanges allow you to download a transaction history report to make this easier.
- Report Each Taxable Event on Form 8949
Every time you sold, traded, or used crypto to buy something, it’s considered a taxable event.
You need to list each of these events individually on IRS Form 8949.
For each transaction, you’ll show:
- Date acquired
- Date sold
- Sale amount
- Purchase price
- Your gain or loss
3. Summarize Your Gains and Losses on Schedule D
Once you’ve listed all individual trades on Form 8949, you then summarize your total gains and losses on Schedule D (Capital Gains and Losses).
This form calculates your net gain or net loss for the year.
4. Include Your Crypto Gains or Losses on Form 1040
Finally, your total net gains or losses from Schedule D must be reported on your main tax form, Form 1040. It either increases your taxable income (if you made money) or helps lower it (if you lost money).
How do I report my cryptocurrency earnings and rewards on my taxes?
Crypto earnings — like mining rewards, staking income, or airdropped tokens — are treated differently from trades. Here’s how to report them:
- If You Receive a Form 1099-MISC: If you earned crypto and the company or platform sends you a Form 1099-MISC, you must report that income under the “Other Income” section on your Form 1040.
- If You Don’t Receive a Form 1099-MISC: Sometimes, you might not get a 1099 form.
Even if no form is provided, you’re still responsible for reporting the income yourself!
You’ll need to:- Find the fair market value of the crypto (in U.S. dollars) at the time you received it.
- Report that amount as “Other Income” on Form 1040.
- If You Are Mining as a Business (Self-Employed): If you mine crypto as a business (meaning you regularly mine and intend to make a profit), it gets a little more complicated:
- You must report your mining income on Schedule C (Profit or Loss from Business).
- You may also have to pay self-employment taxes (similar to what freelancers and small business owners pay) using Schedule SE.
How Our Crypto Tax Experts Can Help
Navigating the world of crypto tax forms can feel overwhelming. At Tax Relief Helpers, we specialize in helping crypto investors:
- File accurate, audit-proof returns
- Maximize legal deductions
- Organize their crypto transactions
- Navigate confusing forms like PayPal crypto tax forms
Whether you’re a casual investor or a high-frequency trader, our crypto tax experts are here to make sure you file with confidence and peace of mind.
Written by: Thomas Brooks
Published: August 18, 2025