Crypto Tax Myths in 2025: Fact vs. Fiction
Rules around digital assets are clearer in 2025. Brokers must begin reporting certain digital-asset sales on the new Form 1099-DA for transactions on or after January 1, 2025. Cost-basis reporting for most assets starts later, but gross-proceeds reporting starts now.
Myth 1: Stablecoins are not taxable because they stay at one dollar
Fact: For federal tax, digital assets are property. Stablecoins are listed as digital assets by the IRS. Selling, swapping, or spending them is a taxable disposal even if the gain or loss is only cents.
Myth 2: Small transactions do not need to be reported
Fact: Disposals must be reported regardless of size. With Form 1099-DA beginning for 2025 sales effected by brokers, many small sales will be reported to the IRS, though self-custody and DeFi activity still require your own records.
Myth 3: DeFi rewards are not taxable until you withdraw
Fact: When you have dominion and control over staking rewards they are ordinary income at fair market value when received. Other DeFi rewards can vary based on how the protocol works, but many are taxed on receipt.
Myth 4: Gifting crypto is always tax-free
Fact: The U.S. annual gift-tax exclusion is $19,000 per recipient for 2025. Gifts above that generally require a gift-tax return, though tax may still be offset by the lifetime exemption. In the UK, gifts to non-spouses are disposals for capital-gains purposes.
Myth 5: Paying with crypto is like spending cash and is not taxable
Fact: Paying with crypto is treated as selling property at its fair market value. You must compute any gain or loss on the crypto you spend. The recipient includes the value they receive in income where applicable.
Myth 6: Offshore crypto never needs separate reporting
Fact: Form 8938 may apply for specified foreign financial assets that meet thresholds. FBAR rules apply to foreign financial accounts. Historically, virtual currency by itself was not reportable on the FBAR unless the account also held other reportable assets. Rules continue to evolve, so check current instructions each year.
Myth 7: Losses from failed tokens or depegs do not count
Fact: If you dispose of a failed or depegged asset, you generally have a capital loss. Individuals can deduct up to $3,000 of net capital losses against ordinary income each year, with the rest carried forward.
Myth 8: Exchange reports cover everything for tax filing
Fact: Broker reports such as 1099-DA cover sales that the broker effected. They do not capture off-exchange wallets, many DeFi transactions, or some types of income. You remain responsible for a complete report.
Key Takeaways
- Digital assets are property. Disposals are taxable, including for stablecoins.
- 1099-DA starts for 2025 brokered sales. Keep your own records for self-custody and DeFi.
- Staking rewards are income when you control them.
- The 2025 U.S. gift-tax annual exclusion is $19,000 per recipient.
- Net capital losses can offset up to $3,000 of ordinary income each year.
Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Always consult a qualified tax professional for guidance specific to your situation.
