Why 2025 Crypto Taxes Will Be Trickier Than Normal: What You Need to Know
Episode
82 min
Read time
2 min
Topics
Productivity, Investing, Startups
AI-Generated Summary
Key Takeaways
- ✓Form 1099-DA Requirements: US exchanges must issue Form 1099-DA by February 17, 2026, showing total sales proceeds without cost basis. Taxpayers must supplement missing cost basis information or face default zero basis treatment, resulting in massive overpayment. Wait to file taxes until receiving this form to avoid discrepancies that could trigger audits.
- ✓Wallet-by-Wallet Accounting Transition: Starting January 1, 2025, taxpayers must abandon universal accounting methods for wallet-by-wallet tracking. This requires safe harbor reallocation where you assign cost basis to specific wallets and exchanges. Allocate lowest basis to long-term storage wallets you rarely touch, highest basis to active trading wallets to minimize unintentional capital gains on routine transactions.
- ✓Accounting Method Selection: Choose HIFO, LIFO, or FIFO on exchanges like Coinbase before year-end to control which coins sell first. HIFO maximizes loss deferral by selling highest-cost coins first. FIFO benefits those with only long-term holdings since married couples can realize $131,000 in long-term capital gains tax-free when combined with standard deduction.
- ✓Prediction Market Tax Treatment: Polymarket and similar platforms create two taxable events: depositing crypto triggers capital gains, then wins and losses count as gambling income. Gambling losses only deduct if you itemize on Schedule A, and the 2026 tax law limits deductions to 90% of winnings, creating phantom income even on breakeven activity.
- ✓Stablecoin Reporting Burden: Stablecoin transactions appear on Form 1099-DA with zero cost basis despite having equal proceeds and basis. Taxpayers must manually supplement these on Schedule D and Form 8949. The proposed Digital Asset Parity Act would eliminate stablecoin reporting entirely, treating them like cash rather than property for tax purposes.
What It Covers
Laura Walter, CPA and founder of CryptoTaxGirl, explains why 2025 crypto taxes present unprecedented complexity. New Form 1099-DA from US exchanges, mandatory wallet-by-wallet accounting replacing universal methods, and safe harbor reallocation requirements create substantial compliance burdens. The episode covers specific tax treatment for DeFi, staking, mining, airdrops, prediction markets, and strategies for minimizing tax liability.
Key Questions Answered
- •Form 1099-DA Requirements: US exchanges must issue Form 1099-DA by February 17, 2026, showing total sales proceeds without cost basis. Taxpayers must supplement missing cost basis information or face default zero basis treatment, resulting in massive overpayment. Wait to file taxes until receiving this form to avoid discrepancies that could trigger audits.
- •Wallet-by-Wallet Accounting Transition: Starting January 1, 2025, taxpayers must abandon universal accounting methods for wallet-by-wallet tracking. This requires safe harbor reallocation where you assign cost basis to specific wallets and exchanges. Allocate lowest basis to long-term storage wallets you rarely touch, highest basis to active trading wallets to minimize unintentional capital gains on routine transactions.
- •Accounting Method Selection: Choose HIFO, LIFO, or FIFO on exchanges like Coinbase before year-end to control which coins sell first. HIFO maximizes loss deferral by selling highest-cost coins first. FIFO benefits those with only long-term holdings since married couples can realize $131,000 in long-term capital gains tax-free when combined with standard deduction.
- •Prediction Market Tax Treatment: Polymarket and similar platforms create two taxable events: depositing crypto triggers capital gains, then wins and losses count as gambling income. Gambling losses only deduct if you itemize on Schedule A, and the 2026 tax law limits deductions to 90% of winnings, creating phantom income even on breakeven activity.
- •Stablecoin Reporting Burden: Stablecoin transactions appear on Form 1099-DA with zero cost basis despite having equal proceeds and basis. Taxpayers must manually supplement these on Schedule D and Form 8949. The proposed Digital Asset Parity Act would eliminate stablecoin reporting entirely, treating them like cash rather than property for tax purposes.
- •Airdrop Income Recognition: Airdrops count as ordinary income at fair market value when you gain dominion and control, even if you never sell. Set aside tax money immediately for significant airdrops. Proposed legislation would defer taxation until sale, but current law requires immediate income recognition regardless of whether a liquid market exists for the token.
Notable Moment
Walter reveals that Celsius bankruptcy creditors face complex tax calculations because distributions arrive in different assets than originally deposited, with claim values based on depressed mid-2022 prices while distributions pay out at current prices five to six times higher. Despite appearing made whole, creditors can still claim substantial losses through proper calculation of the non-kind distribution mechanics.
Episode Transcript
If you were audited, then IRS sees that, like, you were using these privacy coins like Monero or something, then there's just a higher burden of proof on taxpayers to show their record keeping, to prove what they bought these for, what their cost basis was. Because if you don't have the records and then you're audited if you don't have any proof showing this is what I actually bought, like, my Monera for or whatever, then the default is to just treat it as a $0 basis, which, obviously, is a big problem. Hey, everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. Thanks for joining this livestream. Before we get started, a quick reminder, nothing new here in Unchained is investment advice. This show is for informational and entertainment purposes only, and my guest and I may hold assets discussed on the show. For more disclosures, visit unchainedcrypto.com. This episode is brought to you by Adaptive Security, the first cybersecurity company backed by OpenAI. As AI makes deep fakes and synthetic identities easier than ever, Adaptive helps companies test and strengthen their defenses. Learn more at adaptivesecurity.com. If crypto taxes feel overwhelming, you are not alone. That's why CryptoTaxGirl, a team that's been helping crypto investors since 2017, is offering $100 off on one on one crypto tax help. To get $100 off your crypto tax services, go to cryptotaxgirl.com/unchained. Again, that's cryptotaxgirl.com/unchained. And as you could expect, today's topic is twenty twenty five crypto taxes. Here to discuss is Laura Walter, founder and CPA of CryptoTax Girl. Welcome, Laura. Thanks, Laura, for having me. I'm excited to be here. Yeah. I'm excited to have you. So with the way the crypto markets ended in 2025, the audience may be wondering what it is that they have to pay taxes on. If you're new to crypto, I hate to inform you, but it doesn't work that way. So this year, there's actually a few new developments that people should know about for their taxes. So, Laura, we'll start with this new form, the ten ninety nine d a, which stands for digital asset proceeds from broker transactions. And this is a new form that brokers will be sending to their customers. So explain what this form is and what information will be on it. Yeah. I'm glad we're jumping right into this because, honestly, 2025, I think, is kind of set up to be one of the most complicated year when it comes to reporting crypto taxes for anyone in the crypto space. I think this October a was maybe created in somewhat to try and make crypto taxes easier because to date, it's been all self reported, and it's something that you have to calculate on your own. But ten ninety nine d a makes it so that you still actually need to report and calculate the majority of it on your own, but you have to also match …
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by Coinbase
“Choose HIFO, LIFO, or FIFO on exchanges like Coinbase before year-end to control which coins sell first.”
“Polymarket and similar platforms create two taxable events: depositing crypto triggers capital gains, then wins and losses count as gambling income.”
company
“Walter reveals that Celsius bankruptcy creditors face complex tax calculations because distributions arrive in different assets than originally deposited.”
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