Bitcoin Taxes in 2025 and Beyond
Introduction: Bitcoin Taxes in 2025 and Beyond
With Bitcoin evolving rapidly, tax obligations for BTC holders are becoming more complex. From buy‑and‑hold strategies to developments like Runes, Ordinals, and BRC‑20 tokens, investors must stay informed about how these activities impact their tax reporting.
This guide demystifies the process so you can accurately report gains, losses, and income from emerging Bitcoin protocols. Whether you’re a casual enthusiast or an active trader, understanding compliance basics helps you avoid penalties and grow your digital assets.
Connecting Your Bitcoin Wallet to Awaken
After you sign up for Awaken, connecting your Bitcoin wallet can be completed in a few steps:
Go to the Accounts tab on Awaken
Click Add Account
Type Bitcoin in the search bar
Click Add Wallet
Paste your public Bitcoin wallet address (starting with
1,3, orbc1)
Awaken will automatically fetch all transactions associated with that address, including sends, receives, and transfers.
📌 Note: If you’ve used multiple Bitcoin addresses (e.g., different ones for each transaction), be sure to add each one separately to ensure full transaction coverage.
Understanding Bitcoin’s Innovations
Runes
A token protocol on Bitcoin, similar in concept to Ethereum’s ERC‑20.
Used to create, manage, or track tokens/data directly on the Bitcoin blockchain.
Tax impact: Minting, trading, or receiving Runes triggers cost‑basis reporting and potential capital gains or losses.
Ordinals
Method of inscribing data onto individual satoshis (1 BTC = 100,000,000 sats).
Can represent digital art or NFT‑like collectibles on Bitcoin.
Tax impact: Selling or transferring an inscribed satoshi is a taxable event—keep records of acquisition dates and fair market values.
BRC‑20 Tokens
Fungible tokens built on Bitcoin via the Ordinals protocol, modeled after ERC‑20.
Popular for community projects and memecoins.
Tax impact:
Minting: Acquired at fair market value (cost basis) when created.
Trading: Any sale, swap, or exchange is potentially taxable.
Bitcoin Taxes on Runes, Ordinals, and BRC-20 Tokens
Runes Taxes
Runes are a Bitcoin token standard that function much like ERC-20 tokens on Ethereum, and the IRS generally treats them the same way as other cryptocurrencies. When you mint Runes, the fair market value at the time of creation becomes your cost basis. Selling, swapping, or spending Runes later can result in capital gains or losses depending on the difference between your disposal price and your cost basis. If you receive Runes as payment for work or services, they may be taxed as ordinary income at the time of receipt, with additional capital gains or losses recognized when you eventually sell or trade them.
Ordinals Taxes
Ordinals are unique Bitcoin inscriptions—similar to NFTs—that attach data directly to individual satoshis. Selling an Ordinal, whether for Bitcoin, stablecoins, or fiat, is considered a taxable event and will usually result in a capital gain or loss. If you create and sell Ordinals as part of a business or regular activity, your proceeds may be classified as self-employment income, subject to both income tax and self-employment tax in the U.S. The tax rate applied to gains depends on your holding period—short-term capital gains rates apply if held for one year or less, and long-term rates apply if held longer.
BRC-20 Taxes
BRC-20 tokens are fungible assets built on the Bitcoin blockchain via the Ordinals protocol, and they are taxed similarly to altcoins on other blockchains. Minting establishes your cost basis at the token’s fair market value on the creation date. Trading, swapping, or selling BRC-20s for other crypto, stablecoins, or fiat triggers capital gains or losses. If you acquire BRC-20 tokens through airdrops, mining, or similar reward programs, their value at receipt is treated as ordinary income, with later gains or losses taxed separately upon disposal.
For more information on current crypto taxes, see our full guide to crypto gains tax rates in the United States and around the globe.
Key Taxable Events
Sales for Fiat: Converting Bitcoin, Runes, BRC‑20 tokens, or Ordinals to USD, EUR, etc.
Swaps: Exchanging one crypto asset for another (e.g., BTC → ETH or BRC‑20 → BTC).
Minting/New Tokens: Receiving new tokens may count as income if they have immediate market value.
Airdrops/Rewards: Staking or promotional distributions are taxed as ordinary income.
Purchases: Paying for goods/services with BTC or tokens is treated like a sale.
Tracking Transactions & Cost Basis
Crypto Tax Tools
Use specialized software (e.g., Awaken Tax) that supports Runes, Ordinals, and BRC‑20.
Automatically import data, calculate cost basis, separate short‑term vs. long‑term gains, and generate reports (e.g., Form 8949, Schedule D).
Manual Records
If software lacks full support, record:
Date of acquisition
Quantity of tokens/satoshis
Transaction hash
Fair market value (BTC/fiat)
Associated fees (network, transaction)
Best Practices for Reporting
Document Inscription Details: Track dates, sats inscribed, and any external prices for Ordinals.
Flag Free Tokens: Airdrops/BRC‑20 received at no cost may count as ordinary income at fair market value.
Separate Personal vs. Business: Treat frequent minting/trading as a business for accurate expense and tax handling.
Use Multiple Wallets: Keep experimental or business transactions separate from personal holdings.
Common Pitfalls
Ignoring Fees: Include network fees in your cost basis to avoid miscalculations.
Mislabeling Transfers: Internal wallet transfers aren’t taxable—don’t log them as sales.
Overlooking Airdrops: Free distributions such as airdrops can trigger income tax events.
Neglecting NFT‑Like Sales: Profits from Ordinal sales count as capital gains.
FAQs
Do I owe taxes just for holding Ordinals?
No, holding alone isn’t taxable, but selling or swapping is.
Are Runes/BRC‑20 treated like Ethereum tokens?
Generally yes—tax authorities classify them as property, so cost basis and gains/losses apply similarly.
How do I find fair market value?
Check reputable aggregators or marketplaces with active trading for your tokens.
Do I need separate software?
Many tax platforms are adding Bitcoin protocol support; manual tracking may be needed temporarily.
Tax implications for Ordinal creators?
Professional creators may treat Ordinals as inventory; sales trigger taxable gains and business considerations.
Conclusion
Bitcoin’s evolution with Runes, Ordinals, and BRC‑20 tokens brings new creative and financial opportunities—but also tax responsibilities. By identifying taxable events, keeping detailed records, and leveraging specialized tax software, you can maintain compliance and reduce stress.
Disclaimer: This document is for informational purposes only and does not constitute tax, financial, or legal advice. Always consult a qualified professional for guidance tailored to your situation.
