The Important Bits
New for 2025: Many United States crypto brokers must begin reporting digital asset dispositions (sales, swaps, certain spend activity) on Form 1099‑DA, and must furnish taxpayers a copy of what they report to the Internal Revenue Service.
New for 2025: Most 2025 Form 1099‑DA statements will show gross proceeds, not cost basis, so you’ll often need to use your own records to calculate basis/holding period and reconcile what you report on your return.
New for 2025: the IRS is strongly recommending (and effectively requiring) that U.S. digital asset holders transition from the prior Universal cost basis methodology to By-Wallet Basis.
Digital assets are treated as property for U.S. tax purposes: disposing of crypto can result in capital gain or loss, while receiving crypto (for example, as payment or certain rewards) may be ordinary income depending on the facts.
Best practice: Keep complete records (dates, amounts, USD fair market values, fees, transfers); this can be done manually or with the help of crypto tax software like ZenLedger.
Disclaimer: BitPay does not provide tax, investment, or other financial advice. We strongly advise you to contact a personal tax advisor or other tax professional for any questions or information about your personal tax circumstances.
How is cryptocurrency taxed in the U.S.?
Right away, the bottom line is that you are required to pay taxes on crypto in the USA. As of the 2025 tax year (filed in 2026), the IRS considers cryptocurrency a property, so cryptocurrency is taxed the same as stocks, real estate or any other property.
Taxable events must be reported – this is, whenever you sell, trade or relinquish crypto, convert one crypto to another and earn any sort of gain or loss. You do not pay taxes on the entire transaction amount, only the profit/loss (known as capital gains tax).
Your tax rate will depend on a combination of how long you’ve held your crypto assets and the value of your gains. Assets held for less than one year are taxed at a short-term gains rate. Assets held for longer than one year are taxed at a long-term gains rate. Read more about crypto tax rates to dive deeper.
Important! This article is to be used for informational purposes only. We highly recommend you consult a licensed tax professional if you have any questions about preparing tax returns that involve crypto transactions.Information in this article also does not constitute financial advice and we encourage you to do your own research.
What are taxable crypto events?
The IRS considers any event in which you profited from a cryptocurrency transaction to be taxable. Buying crypto in itself is not a taxable event. Neither is holding crypto, even if your portfolio is significantly more valuable than previous periods (lucky you). It is the act of selling or converting to fiat or any other crypto currency and earning a profit from that disposal that signals the taxable event.
Suppose you acquired 1 Bitcoin for $10,000 and now wish to use it when the fair value is $50,000. Here’s how that cryptocurrency event would be taxed:
Sell 1 BTC for $50,000 USD: capital gain is $50,000 − $10,000 = $40,000.
Swap 1 BTC for ETH worth $50,000: you dispose of BTC; capital gain is $40,000; your new ETH basis generally starts at $50,000 (its value when received in the swap).
Buy goods/services priced at $50,000 using 1 BTC: you dispose of BTC for goods/services; capital gain is $40,000.
Read ZenLedger’s guide to crypto taxes for more advanced scenarios and details around taxable events. Things can get a bit more complicated when advanced crypto activities like margin trading, mining, hacks, lending, staking, airdrops and collecting rewards are involved.
How to calculate and prepare your crypto taxes (two ways)
The number one rule for properly reporting and filing your crypto taxes is to keep track of your transactions! This can be done manually, but it may open you up to human error and, let’s be real, is a pain to deal with. A much more efficient way of preparing your taxes is with specialized crypto tax software like ZenLedger.
Method 1: Manually preparing your crypto taxes
The IRS generally expects taxpayers to report sales, swaps, and other dispositions of crypto (digital assets) on Form 8949. Use this form to list the details of each taxable disposal and calculate your capital gain or loss, including (as applicable):
Description (name) of the digital asset
Date acquired
Date sold or disposed of
Proceeds (sale price or fair market value received)
Cost basis (generally what you paid, plus certain acquisition costs)
Gain or loss (proceeds minus basis), and whether it’s short‑term or long‑term
Once you’ve totaled your gains/losses on Form 8949, carry the subtotals to Schedule D (Form 1040). File Form 8949 and Schedule D with your annual federal income tax return.
For 2025, many U.S. crypto brokers will issue Form 1099‑DA covering digital asset dispositions (including many sales and swaps). These 2025 forms often report proceeds only and may not include cost basis, so you’ll usually need your own records (trade confirmations, CSV exports, wallet history) to determine basis and holding period before completing Form 8949 and Schedule D. Even if you don’t receive a Form 1099‑DA, you’re still responsible for reporting all digital asset income, gains, and losses on your return.
Method 2: Automating your crypto taxes
You could manually keep track of your transactions in a spreadsheet and then fill in each form, but this can be a tedious task. Instead, BitPay and ZenLedger make this an easy and automated process. BitPay users can sync wallet transactions directly from within the app to ZenLedger’s intuitive tax software. With just a few taps from the BitPay app, ZenLedger can automatically calculate fair market value, gains/loss, apply cost basis to the tranche of the crypto sold, and tax-loss harvesting from your transaction history. It can also calculate cost basis using various methods such as FIFO, LIFO, specific identification etc.
For realized gains and losses to be calculated accurately, it is important to have the underlying data from all the wallets and exchanges where you have crypto aggregated accurately. Any inter-wallet or interexchange transfers between your own accounts will be eliminated upon consolidation as such transfers do not trigger taxable events. However, fees paid in digital assets can matter for reporting and basis/gain calculations.
How to use BitPay + ZenLedger to prepare your crypto taxes
Importing your transactions and crypto info to the ZenLedger platform is easy and secure. This integration is applicable only to BitPay users based in the United States and Canada.
For current BitPay users, make sure you have the latest version of the BitPay Wallet. For new users, download the app here.
Tap the Settings icon in the lower right corner, select Connections, then tap ZenLedger Taxes
You will be prompted to connect your wallet to ZenLedger.
Log in or create your free ZenLedger account.
Choose the wallets holding the transactions you wish to import into ZenLedger.
Once you’ve created a ZenLedger account and connected your wallet, your transactions will appear within your ZenLedger dashboard. Now you are ready to use ZenLedger to prepare and file your crypto taxes.
Did you know you can import existing wallets to the BitPay app? Even if you created your wallet using another self-custody app provider, you can manage your funds from the BitPay Wallet app by using your recovery phrase.
Disclaimer: BitPay does not provide tax, investment, or other financial advice. We strongly advise you to contact a personal tax advisor or other tax professional for any questions or information about your personal tax circumstances.
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Minimizing your crypto tax liability
As outlined by ZenLedger, there are multiple ways to reduce your crypto tax liability. Some of the most common ways include:
Use crypto tax software like ZenLedger to save yourself from human error
Leverage tax-loss harvesting to realize losses before paying taxes
Consolidate transactions across wallets and exchanges, and properly exclude non-taxable transactions
Sell your assets depending on the timing of when you anticipate moving into a higher tax brackets
Benefit from long-term capital gains if assets are held for more than 1 year to lower your tax rate
Hire a crypto-friendly accountant for a more streamlined tax process (when needed in advanced scenarios), and consult your CPA for tax advice on a timely basis
Diversification of assets with a crypto IRA have certain tax benefits that you can consider as well
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Note: All information herein is for educational purposes only, and shouldn't be interpreted as legal, tax, financial, investment or other advice. BitPay does not guarantee the accuracy, completeness, or usefulness of any information in this publication and we neither endorse, nor are we responsible for, the accuracy or reliability of any information submitted or published by third parties. Nothing contained herein shall constitute a solicitation, recommendation, endorsement or offer to invest, buy, or sell any coins, tokens or other crypto assets. BitPay is not liable for any errors, omissions or inaccuracies. For legal, tax, investment or financial guidance, a professional should be consulted.
