5 FAQs on Cryptocurrency Taxes in 2025

Cryptocurrency continues to raise questions for tax preparation clients, and 2025 brings even more complexity with new IRS guidance and reporting forms. In fact, about one-third of tax professionals report ongoing client confusion about crypto, according to Drake Software’s 2025 IRS Trends report.

To help ease concerns and increase accuracy in your professional tax preparation workflow, let’s look at some cryptocurrency FAQs you'll likely hear this season.   

How do I calculate gains or losses on crypto transactions?

Cryptocurrency is treated as property by the IRS. This means each transaction (buy, sell, trade) requires a cost basis and fair market value comparison to calculate a gain or loss. Tax preparers should use Form 8949 to report capital gains or losses for each individual cryptocurrency transaction.

Do I owe taxes if I traded one crypto for another? 

Yes. Crypto-to-crypto trades are taxable events. Even if no cash was involved, the IRS requires taxpayers to report the fair market value of the asset received at the time of the trade. For example, if a client trades Ethereum® for Bitcoin, the value of Bitcoin received on the date of the trade is used to calculate a gain or loss.

Do I need to report every crypto transaction?

Yes. Every taxable event involving digital assets—whether it’s a sale, trade, or payment for goods—must be reported. New in 2025, the IRS has introduced Form 1099-DA, which brokers must issue to report digital asset transactions. You can expect clients to bring this new form during tax prep.

What about crypto received from mining, staking, or airdrops? 

These are typically treated as ordinary income. Taxpayers must report the fair market value of the crypto received on the date they received it. Remind clients that failing to report this income may trigger audits or IRS penalties under enhanced digital asset tax rules.

What should I do if a client didn’t keep accurate records?

Clients without complete records can use exchange histories, wallet trackers, or blockchain explorers to reconstruct transaction data. Drake Software® supports digital asset import tools to make this process easier. Encourage clients to use crypto portfolio tools going forward to avoid record keeping issues.

Instilling confidence in your tax preparation clients is a vital part of your position as their preparer. As a trusted advisor, staying ahead of IRS crypto guidance, understanding filing requirements for Forms 8949 and 1099-DA, and addressing common questions will position you as a valuable partner for clients navigating tax season 2025.

Enjoyed this blog post? Read more about helping clients file digital asset taxes with confidence.