By Martin Wongkoltoot, Tax Supervisor
Digital assets, such as cryptocurrencies, NFTs (non-fungible tokens), and other blockchain-based tokens, have moved firmly into the financial mainstream. With that growth has come heightened scrutiny from the IRS (and states) as well as changes to reporting.
In this overview, H&S Tax Supervisor Martin Wongkoltoot breaks down what counts as a digital asset, when taxes are triggered, and what you can do now to stay compliant as regulations continue to evolve.
Digital Assets & Taxes: What You Need to Know for 2025
The IRS defines digital assets as any digital representation of value recorded on a cryptographically secured distributed ledger (commonly known as a blockchain). This includes:
- Cryptocurrencies such as Bitcoin, Ethereum, and Solana.
- Stablecoins, which are pegged to a fiat currency like the U.S. dollar (e.g., USDC, USDT).
- Non-Fungible Tokens (NFTs) that represent ownership of unique digital or physical items.
- Other blockchain-based tokens.
Are Digital Assets Taxable?
In short, yes. Digital assets are taxable and treated as property, meaning transactions may generate capital gains/losses or ordinary income.
Taxable Events Include:
- Selling a digital asset for cash.
- Trading one digital asset for another.
- Using cryptocurrency to purchase goods or services.
- Receiving digital assets via mining, staking, airdrops, or as compensation.
What are the Current Reporting Requirements?
- Sales are reported on Schedule D & Form 8949.
- Income (mining/staking) is reported on Form 1040 and may be subject to self-employment tax.
Key IRS Changes for 2025 and 2026:
- Form 1099-DA (2025): Brokers must report all digital asset sales and exchanges.
- Cost Basis Reporting (2026): The IRS will track how much you paid vs. sold for digital assets —automatic gain/loss calculations.
- Real Estate & NFTs: Special reporting rules are coming in 2026.
Recordkeeping Is Critical:
Accurate records are essential. Be sure to retain documentation of:
- Dates of acquisition and sale.
- Fair market value (FMV) at the time of each transaction.
- Transaction fees.
- Wallet addresses and exchange information.
Enforcement Is Increasing:
Expect more IRS reporting, compliance letters sent to taxpayers, and penalties for underreporting.
What’s Next? Proposals Under Consideration:
- Wallet-by-wallet accounting when determining cost basis.
- Formal classification of digital assets as a separate asset class.
- Possible wash-sale rule extension to cryptocurrencies, potentially eliminating a popular loss-harvesting strategy.
- New foreign account reporting requirements.
Action Steps:
- Review your 2025 digital assets transactions.
- Keep detailed records and ensure your broker has the correct cost basis.
- Consult your H&S team member or CPA for guidance.
Digital asset taxation is complex and changing quickly. If you’re unsure how to report your activity or want to be proactive about planning, our tax advisors are here to help you stay compliant and minimize your tax exposure.
Note: This article is provided for general informational purposes only and does not constitute tax, legal, or accounting advice. Tax laws and regulations are complex and subject to change, and their application can vary based on individual circumstances. Consult with your CPA or other qualified tax professional to obtain guidance specific to your personal tax situation.
