Experts Discuss New US Crypto Tax Reporting Rules

As of January 1, 2025, cryptocurrency transactions in the United States will become subject to third-party reporting requirements.

A report published by the US Internal Revenue Service (IRS) in June 2024 states that centralized crypto exchanges (CEXs) and other brokers will be required to report the sales and exchanges of digital assets.

The IRS has rolled out new regulations for crypto tax: Rev. Proc. 2024-28

In other words, if you hold crypto, it’s time to pay attention. Here’s what you need to know. 👇

If you've historically used the Universal cost basis tracking method, it's time to prepare for a change.… pic.twitter.com/Ggm9XMpesN

— CoinTracker (@CoinTracker) November 22, 2024

The report stated that the new tax guidelines are intended to help crypto investors “file accurate tax returns with respect to digital asset transactions.” The rules also seek to address potential noncompliance regarding digital assets.

Crypto Guidelines Show Huge Advancement

While the new crypto tax guidelines may seem burdensome, industry experts believe they represent a turning point for the crypto sector.

Rob Massey, the global tax leader for blockchain and digital assets at Deloitte, told Cryptonews that digital assets have been around for 17 years. He pointed out that 2024 is the first year that we’ve had a meaningful dose of clear crypto tax rules.

“It’s time to pay attention to crypto and taxes,” Massey said. “These rules may be more difficult for crypto holders to understand and may seem impractical at times, but at least we now have published guidance, and that is a huge deal.”

Shehan Chandrasekera, head of tax strategy at Cointracker.com, told Cryptonews that the industry has been seeking clear guidance from the IRS for several years.

“I’m glad it’s finally here,” Chandrasekera said. “It’s reassuring to see that the IRS took the time to carefully review thousands of comments from various stakeholders and develop thoughtful, well-considered guidance.”

Understanding Crypto Tax Rules in 2025

Jonathan Bander, managing partner and head of tax strategy at Experity CPA, told Cryptonews the IRS’ new rules indeed mark a major step in integrating crypto into the broader financial system.

However, Bander believes that understanding the details requires deep knowledge and preparation.

“Crypto investors must now report all transactions – whether your crypto is on an exchange or in a self-custody wallet – capital gains or losses must be reported,” Bander said.

Bander added that crypto transfers are not taxable. “Moving crypto between wallets or exchanges isn’t a taxable event. But keeping good records is essential,” he said.

Additionally, Bander pointed out that centralized exchanges will issue new 1099-DA forms to help taxpayers and the IRS ensure consistent reporting.

New Guidelines Simplify Crypto Taxes

Bander explained that overall the new guidance laid out by the IRS simplifies the tax process for crypto holders. These rules also recognize the growing role of decentralized finance (DeFi).

“For example, these rules legitimize the use of self-custody wallets in tax reporting,” Bander said.

Massey added that it’s striking to see clear guidelines around self-custody of digital assets.

“The US Treasury is acknowledging that crypto holders practice self-custody,” Massey said. “The fact that we have tax processes for self-custody of crypto is a huge advancement, as we had nothing published before this.”

Massey also believes that the IRS providing clarity for “Spec ID” is important.

Spec ID stands for “specific identification,” which is a method used to calculate the cost basis of a cryptocurrency when selling it.

This allows investors to note the exact purchase price of a specific digital asset that is being sold, allowing people to potentially dictate their capital gains.

“For example, if an investor holds all of their Bitcoin in one wallet and wants to spend $100,000 worth of their BTC, the new Spec ID rules allow investors to choose which Bitcoin to spend first,” Massey said.

This is important, as the initial IRS ruling stated that if investors holding crypto assets with a centralized broker don’t select their preferred accounting method, like HIFO (Highest In, First Out) or Spec ID, the broker will default to reporting sales using the FIFO method.

FIFO, which is known as “First In, First Out,” is the default method for calculating capital gains tax in the US. It is calculated by assuming the oldest cryptocurrency bought is sold first, potentially pushing up a taxpayer’s capital gains.

“Spec ID is now available to all crypto investors, but they must get it right,” Massey said.

Will More Tax Rules Come In 2025?

While 2025 marks the first year for clear crypto tax guidelines, new rules may also take shape throughout the year.

The IRS has issued temporary relief under section 1.1012-1(j)(3)(ii)

Here’s what you need to know. 👇

What’s the deal?
For context, the IRS made new rules a while back for CeFi brokers: starting Jan 1, 2025, if you don’t tell the broker how to handle your crypto sales (like…

— CoinTracker (@CoinTracker) January 2, 2025

For example, Bander believes that clear rules around DeFi income will eventually be formed. “This may include how to report income from lending, staking, and liquidity pools,” he said.

Guidelines around non-fungible token (NFT) transactions are also likely.

Bander further noted that wash sale rules that currently do not apply to digital assets will be clarified moving forward.

Crypto Industry Expresses Concerns

Although some industry experts are excited about the potential of new crypto tax guidelines in the US, others view these rules as “unconstitutional” and burdensome.

For example, the Blockchain Association filed a lawsuit against the IRS in December 2024, arguing that the new broker rules are unconstitutional.

Marisa Coppel, head of legal for Blockchain Association, told Cryptonews this rule expands the definition of “broker” to include providers of DeFi trading front-ends, even though they do not effectuate transactions.

“Not only is this an infringement on the privacy rights of individuals using decentralized technology, it would push this entire, burgeoning technology offshore,” Coppel said.

While this may be, Massey shared that since the new crypto guidelines have come into effect, Deloitte has seen an increase in clients.

“We are seeing crypto investors that want to get caught up and be compliant. We are also helping more traditional players, like non-crypto natives enter the sector,” Massey remarked.

Source: cryptonews.com