With cryptocurrency now firmly embedded in the financial mainstream, understanding how crypto is taxed is more important than ever. Whether you invest, trade, earn, or donate digital assets, navigating crypto taxes can feel complex. This guide breaks down the essentials, from taxable events and reporting forms to tracking tools and charitable tax strategies.
Note: The Giving Block is not a tax advisor and does not provide financial or legal advice. This content is for informational purposes only. Please consult a qualified tax professional regarding your specific situation.
What Are Crypto Taxes and When Do They Apply?
In the United States, the IRS treats cryptocurrency as property, not currency. This means crypto transactions are generally subject to Capital Gains Tax or Income Tax, depending on how the crypto was acquired and used.
- Capital Gains Tax applies when you sell, trade, or spend cryptocurrency at a profit.
- Income Tax applies when crypto is earned through mining, staking rewards, airdrops, payments for services, or certain incentives.
- Form 8949 and Schedule D: For gains and losses.
- Schedule 1 or Schedule C: For crypto-related income.
How to Calculate Crypto Taxes
- Determine the Cost Basis: The original purchase price (in USD) plus any associated fees.
- Calculate Gains or Losses: Subtract the cost basis from the sale price.
- Categorize the Transaction: Determine if it’s a short-term (assets held <1 year) or long-term (assets held >1 year) event.
Example:
- Purchased 1 BTC for $20,000 in 2023 and sold it for $40,000 in 2025.
- Gain = $40,000 – $20,000 = $20,000.
- Held for over a year → taxed at long-term Capital Gains rates (0% to 20%).
Common Pitfalls and How to Avoid Them
- Missing Transaction Records: Use tax tools to automatically sync and save data.
- Incorrect Cost Basis Method: Methods like FIFO (First In, First Out) or HIFO (Highest In, First Out) significantly impact tax outcomes.
- Overlooking Charitable Donations: Donating appreciated crypto can reduce or eliminate capital gains taxes while supporting causes you care about.
For a deeper dive, our friends at Koinly have published a detailed guide on U.S. crypto taxes covering common scenarios and reporting considerations.
Top Crypto Tax Tracking Tools
Crypto tax tracking tools are software applications that help cryptocurrency investors and traders accurately calculate and report their capital gains or losses for tax purposes.
- Track cryptocurrency transactions across various exchanges and wallets.
- Automatically calculate cost basis and determine capital gains/losses.
- Generate tax reports in formats compatible with tax filing software (like TurboTax).
- Provide insights and visualizations of cryptocurrency holdings and tax implications.
- Help identify and utilize tax optimization strategies like tax-loss harvesting.
- By using these tools, individuals can streamline their tax filing process, reduce the risk of errors, and potentially minimize their tax liabilities.
- Koinly:
- Tracks transactions across exchanges and wallets.
- Provides IRS-ready tax forms.
- TokenTax:
- Integrates with multiple platforms for seamless reporting.
- Ideal for complex DeFi and NFT taxes.
- CoinTracker:
- Real-time portfolio tracking and tax reporting.
- Supports over 10,000 cryptocurrencies.
- ZenLedger:
- Specialized in tax-loss harvesting.
- Compatible with TurboTax.
- Blockpit (formerly Accointing):
- Offers visual insights into your portfolio.
- Simplifies tax reporting for beginners.
- CoinLedger:
- User-friendly tax reporting for crypto beginners and experts.
- Supports DeFi, NFT, and staking transactions.
- Generates IRS-compliant tax reports in minutes.
- CryptoTaxCalculator:
- Designed for advanced users with complex transaction histories.
- Tracks taxable events across DeFi, margin trading, and yield farming.
Donating Crypto to a 501(c)(3): Tax Benefits Explained
Cryptocurrency donations are one of the most tax-efficient ways to support charitable causes:
- Avoid Capital Gains Tax: Donating crypto directly means you won’t realize a taxable gain on the appreciated value.
- Claim a Fair Market Value Deduction: Deduct the full market value of the cryptocurrency on the day of donation, provided the charity is a registered 501(c)(3).
Required Forms:
- Form 8283: For donations exceeding $500.
- Qualified Appraisal: Mandatory for donations over $5,000.
Example:
- Donated 1 ETH valued at $3,000 to a 501(c)(3) in 2025.
- Deduction = $3,000, potentially saving you hundreds in taxes while supporting a cause.
By directing your crypto donations toward causes that resonate with you, you’re not just impacting the world positively, you’re also unlocking a door that can ease your tax burden substantially.
Whether you’re racing to meet the 12/31 tax deadline for charitable contributions or just want to use your crypto to make a difference, The Giving Block can help.
Search and filter through thousands of charitable organizations and find a cause that matters to you on our donor marketplace.
Qualified Crypto Appraisers
If you’re donating more than $5,000 in crypto to a 501(c)(3) organization, a qualified appraisal is required to claim your tax deduction. To get access to our list of qualified crypto appraisers, please contact our Private Donor Services.
Final Thoughts
Filing crypto taxes doesn’t have to be daunting. With the right tools, professional guidance, and a strategic approach, you can simplify your tax obligations while maximizing deductions. And if you’re considering philanthropy, donating cryptocurrency to a 501(c)(3) organization is not only impactful but also financially advantageous.
For in-depth information on filing crypto taxes, see Koinly’s Crypto Taxes: Expert USA Guide.
