As we approach the end of 2025, it’s crucial for cryptocurrency investors to review their tax situation, especially if you’ve realized capital gains this year. The IRS continues to treat cryptocurrency as property, not currency, which means that every sale, exchange, or disposition of crypto is a taxable event. Here’s what you need to know and what you can do before December 31 to optimize your tax outcome.
1. Understand How Crypto Gains Are Taxed
- Short-term vs. Long-term Gains: If you held your crypto for one year or less before selling, your gains are taxed as ordinary income, at rates up to 37%. If you held for more than one year, you benefit from preferential long-term capital gains rates: 0%, 15%, or 20%, depending on your taxable income and filing status.
- 2025 Long-Term Capital Gains Brackets: For single filers, the 0% rate applies up to $48,350 of taxable income, the 15% rate up to $533,400, and the 20% rate above that. For married filing jointly, the 0% rate applies up to $96,700, the 15% rate up to $600,050, and the 20% rate above that.
2. Offset Gains with Losses (Tax-Loss Harvesting)
- Harvesting Losses: If you have crypto positions at a loss, consider selling them before year-end to realize the loss. Capital losses can offset capital gains dollar-for-dollar, and if your losses exceed your gains, you can deduct up to $3,000 ($1,500 if married filing separately) against ordinary income, with the remainder carried forward to future years.
- No Wash Sale Rule (Yet): As of November 2025, the wash sale rule does not apply to crypto. This means you can sell at a loss and immediately repurchase the same asset without disallowing the loss. However, Congress has considered closing this loophole, so check for any late-year legislative changes.
3. Charitable Giving of Appreciated Crypto
- Donate Directly: Donating appreciated crypto held for more than one year to a qualified charity allows you to deduct the full fair market value and avoid capital gains tax on the appreciation. For gifts over $5,000, a qualified appraisal is required.
- Qualified Appraiser: The IRS requires a qualified appraisal for large crypto donations, and the rules for who qualifies as an appraiser are still evolving. Work with a tax professional to ensure compliance.
4. Gifting Crypto to Family
- Annual Exclusion: You can gift up to $18,000 per recipient in 2025 without using your lifetime exemption or triggering a gift tax return. The recipient takes your cost basis.
- Lifetime Exemption: The lifetime gift and estate tax exemption remains high in 2025, but is scheduled to decrease in 2026 unless Congress acts. Consider larger gifts if you are planning to transfer significant wealth.
5. Review Your Records and Reporting Obligations
- Form 8949 and Schedule D: All crypto sales, exchanges, and dispositions must be reported on Form 8949 and Schedule D, even if you had no gain or loss.
- Foreign Accounts: If you hold crypto on a foreign exchange or wallet and the total value exceeds $10,000 at any time during the year, you may have to file an FBAR (FinCEN Form 114).
- Broker Reporting: New IRS rules require brokers to report digital asset sales on Form 1099-DA starting in 2026, but you are still responsible for accurate reporting in 2025.
6. Consider the Net Investment Income Tax (NIIT)
- If your modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly), you may owe an additional 3.8% NIIT on your net investment income, including crypto gains.
7. Plan for Estimated Taxes
- If you had significant gains and did not have enough tax withheld, you may need to make an estimated tax payment by January 15, 2026, to avoid penalties.
8. Be Aware of State Tax Issues
- Some states have their own rules for crypto taxation, and a few are more favorable than others. If you moved or are considering moving, review your state’s tax treatment of digital assets.
9. Special Considerations for High Net Worth and Business Investors
- Deferred Tax Strategies: Some companies and high net worth individuals use holding strategies to defer recognition of gains, but be aware of the volatility and the risk of future tax law changes.
- Trusts and Estates: If you are planning for inheritance, crypto receives a step-up in basis at death, but proper documentation and access instructions are essential for heirs.
10. Stay Informed
- The regulatory and tax landscape for crypto is evolving. Monitor IRS guidance and consider working with a tax professional who is up to date on the latest developments.
Bottom Line: If you realized crypto gains in 2025, now is the time to review your portfolio, harvest losses, consider charitable or family gifts, and ensure your records are complete. Proactive planning before year-end can help minimize your tax bill and avoid surprises next spring.
For personalized advice, consult a qualified tax advisor familiar with digital assets.
At Inter CPA LLC, we specialize in tax planning for crypto holders, founders, and investors.
We combine traditional CPA experience with advanced expertise in blockchain and digital assets.
Book a 20-minute Crypto Tax Strategy Call, Email us at info@inter.cpa or send a direct message on LinkedIn.
Additional relevant sources:
1. IRS Publications and Guidance
Internal Revenue Service. (2025). Publication 550: Investment Income and Expenses (Including Capital Gains and Losses).
Internal Revenue Service. (2025, January 20). Internal Revenue Bulletin 2025-4.
2. Treasury Regulations
Department of the Treasury. (2025, January 20). 26 CFR Part 1: Income Taxes (Final and Proposed Regulations on Consolidated Returns, Net Investment Income Tax, and Related Provisions). In Internal Revenue Bulletin 2025-4 (T.D. 10018, T.D. 10019, REG-134420-10).
3. IRS Cryptocurrency Guidance
Internal Revenue Service. (2014, March 25). Notice 2014-21: IRS Virtual Currency Guidance. https://www.irs.gov/pub/irs-drop/n-14-21.pdf
Internal Revenue Service. (2023, May 15). Frequently Asked Questions on Virtual Currency Transactions. https://www.irs.gov/individuals/international-taxpayers/frequently-asked-questions-on-virtual-currency-transactions
4. Charitable Contributions of Cryptocurrency
Internal Revenue Service. (2024). Publication 526: Charitable Contributions.
Internal Revenue Service. (2023, January 13). Chief Counsel Advice 202302012: Charitable Contributions of Cryptocurrency. https://www.irs.gov/pub/irs-wd/202302012.pdf
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