IRS Tightens Grip on Crypto with New 2025 Rules

• IRS unveils new crypto rules. 
• Crypto transactions, gifts, and donations targeted. 
• Crypto investors face audits. 

As Bitcoin breaks all-time highs, US tax authorities are increasingly focusing on crypto. The Internal Revenue Service (IRS) is significantly expanding its oversight over crypto and implementing new rules for 2025. 

Starting next year, investors will face new requirements with crypto trading. This includes reporting sales directly, a standard that already exists with stocks. 

IRS Unveils New Rules for Crypto in 2025

The IRS is rolling out new rules on crypto taxation. On Tuesday, November 26, the Wall Street Journal reported on the new rules, which are set to take effect in 2024 and cover reporting, taxable income, gifts, and more.

For tax purposes, the IRS classifies cryptocurrencies as property. This means the sale, exchange, or purchase of goods and services using digital assets is taxable. Brokers that deal with crypto will have to issue a new form, 1099-DA, to both the IRS and taxpayers.

IRS Cracks Down on Evasion

The new IRS rules are part of a growing effort to crack down on tax loopholes in crypto. Mark Howe, a tax lawyer at Cadwalader, Wickersham & Taft, warned investors about the new rules. “The reporting regime is coming. Now is the time for taxpayers to clean up their digital books,” he stated.

Investors in the US pay taxes on realized gains . This means that any profit they make from selling their crypto is taxable. At the same time, selling crypto at a loss enables investors to write off losses on their taxes. 

The IRS is also stepping up prosecutions for tax evasion. Recently, the agency went after early BTC investor Frank Richard Ahlgren III, who was accused of consistently underreporting his crypto gains. 

On the Flipside

• The incoming Trump administration is expected to significantly change crypto regulation. Therefore, it is unknown whether the new IRS rules will remain in place. 
• DeFi and other sophisticated instruments often blur the distinction between taxable and untaxable income. 

Why This Matters

Clearer tax rules will bring clarity to crypto investments, potentially attracting institutional investors. However, they will also increase the burdens on retail investors. 

Read more about the IRS and crypto: 
FTX and IRS Secure Settlement Approval in $24B Debt Claim

Read more about Trump’s crypto plans: 
Trump Administration to Empower CFTC in Crypto Regulation Shift