Crypto Tax Preparation

Every taxable crypto event — selling, trading, swapping, or spending — is reported on Form 8949 with the asset, dates, proceeds, cost basis, and gain or loss. Totals flow onto Schedule D (Form 1040). Crypto income from staking, mining, and airdrops is reported as ordinary income on Schedule 1 or Schedule C.

Starting in 2025, exchanges also issue Form 1099-DA to report gross proceeds directly to the IRS, which must be reconciled against your records before filing. You must also answer “Yes” to the digital asset question on page 1 of Form 1040 if you had any crypto activity during the year.

The core forms are: Form 8949 for reporting each individual crypto sale or disposal; Schedule D for summarizing net capital gains and losses; Schedule 1 for crypto income like staking, mining, and airdrops; and Schedule C if your activity qualifies as a business. Starting in 2025, you’ll also receive Form 1099-DA from exchanges reporting gross proceeds to the IRS.

Depending on your situation, you may also need FBAR (FinCEN 114) for foreign exchange accounts over $10,000 or Form 8283 for charitable crypto donations over $500.

Yes. Crypto losses offset capital gains from any investment. If losses exceed gains, you can deduct up to $3,000 against ordinary income ($1,500 if married filing separately), with remaining losses carrying forward indefinitely. Unlike stocks, crypto is not currently subject to the wash sale rule, making tax-loss harvesting especially powerful — you can sell at a loss and repurchase immediately.

Losses must be reported on Form 8949 with accurate cost basis. A crypto CPA can identify all harvesting opportunities and ensure proper documentation.

Yes. Trading one crypto for another (e.g., ETH for USDC) is treated as a sale of the first asset and purchase of the second. You report the gain or loss on Form 8949 based on fair market value at the time of the swap. DeFi interactions — liquidity pools, wrapping tokens, yield farming — may also trigger taxable events.

The IRS has explicitly ruled that crypto does not qualify for like-kind exchange treatment under Section 1031, so every crypto-to-crypto trade is fully taxable in the year it occurs.

Simply holding crypto does not trigger capital gains tax. However, you must still answer “Yes” to the Form 1040 digital asset question if you purchased or acquired any cryptocurrency during the year. If you received crypto through staking, mining, airdrops, or as payment, those receipts are taxable as ordinary income even if you didn’t sell.

Also note that transfers between your own wallets are not taxable, but exchanges may misreport them as sales on your 1099-DA — a common source of incorrect CP2000 notices.