Understanding your tax obligations when trading cryptocurrency is essential for staying compliant with IRS regulations. As digital assets continue to mature as an investment class, tax reporting requirements are becoming more structured and transparent. This guide breaks down everything you need to know about crypto taxes, from reporting obligations and cost basis calculations to upcoming IRS changes in 2025 and beyond.
Whether you're a casual trader or actively managing a diversified portfolio, clarity on these topics ensures accurate filings and helps avoid penalties. Let’s dive into the most frequently asked questions with clear, actionable insights.
Do You Need to Report Crypto Trades to the IRS?
Yes — in most cases, you are required to report cryptocurrency transactions to the Internal Revenue Service (IRS). According to current IRS guidelines, virtual currency is treated as property, meaning standard capital gains tax rules apply just like stocks or real estate.
Every time you sell, trade, or dispose of crypto, you may realize a taxable event. If you sold cryptocurrency at a profit, you owe capital gains tax. If you sold at a loss, you may be able to offset other gains or claim a deduction (subject to annual limits).
👉 Learn how to track taxable events across platforms efficiently.
Notably, if your crypto rewards or proceeds exceed $600 in a tax year, Robinhood will issue a Form 1099-MISC or 1099-B, which is also reported directly to the IRS. Even if you don’t receive a 1099 form, you’re still responsible for reporting all taxable transactions.
Always consult a qualified tax professional to ensure compliance with your specific situation.
Understanding Crypto Cost Basis and Tax Calculations
The cost basis of your cryptocurrency is the foundation for calculating capital gains or losses. It typically includes:
- The purchase price of the asset
- Any associated fees or commissions
- The fair market value at the time of receipt (for rewards, airdrops, or gifts)
Robinhood provides cost basis information when available, depending on how and where you acquired your crypto:
- ✅ Purchased via Robinhood: Full cost basis is tracked and provided.
- ✅ Received as rewards on Robinhood: Basis is calculated using the fair market value at the time of receipt.
- ❌ Transferred from another platform: Cost basis is not available because transfer data doesn’t include historical pricing.
If you transferred crypto into Robinhood from an external wallet or exchange, it's your responsibility to determine and report the correct cost basis on your tax return.
How Tax Lots Are Closed: FIFO and Zero-Cost Basis Rules
Robinhood uses the First In, First Out (FIFO) method to close tax lots when you sell or withdraw crypto. This means the earliest acquired coins are considered sold first.
However, there’s an important exception:
When you have crypto with an unknown or zero cost basis (such as transfers into Robinhood), those lots are closed before applying FIFO.
This can impact your tax liability — especially if those transferred assets had appreciated in value prior to the transfer. Without accurate records, you may end up underreporting gains.
👉 Discover tools that help automate cost basis tracking across wallets and exchanges.
Where to Find Official IRS Guidance on Cryptocurrency
The IRS has been actively refining its approach to digital asset taxation. A major update came on August 25, 2023, when the IRS released proposed regulations that clarify broker reporting requirements for cryptocurrencies.
These rules are shaping future compliance expectations — and Robinhood has committed to aligning with any finalized guidelines as they take effect.
What’s Changing in 2025: Introduction of Form 1099-DA
Starting in 2025, a new IRS form — Form 1099-DA — will replace the current 1099-B for reporting digital asset transactions.
Key features of Form 1099-DA:
- Reports gross proceeds to both taxpayers and the IRS
- Provides cost basis (when available) directly to customers
- Applies specifically to sales and exchanges of cryptocurrencies
This shift aims to standardize reporting and reduce discrepancies between taxpayer filings and IRS records.
What to Expect in 2026 and Beyond
By 2026, reporting requirements will expand further:
- Both gross proceeds and cost basis will be reported to the IRS
- The scope will include crypto transfers between wallets or platforms, making it easier for the IRS to track movement and basis across accounts
While full implementation details are still evolving, this signals increased transparency and stricter enforcement ahead.
For authoritative updates, refer to:
How Do Crypto Merges or Hard Forks Affect Your Taxes?
A hard fork or merge occurs when a blockchain splits or upgrades, potentially resulting in new tokens being distributed to holders of the original cryptocurrency.
From a tax perspective:
- Receiving new cryptocurrency after a hard fork or merge is generally considered ordinary income at the time of receipt
- The value is based on the fair market price of the new token on the day it becomes accessible
- This triggers a reportable event, which may be reflected on your 1099-MISC form if over $600
For the current tax year, Robinhood reported no such events for any supported cryptocurrencies. However, if one occurs in the future, expect proper documentation and reporting through your tax forms.
Year-End Cutoff for Crypto Transactions
Timing matters when it comes to tax reporting. For Robinhood Crypto, LLC, the official year-end cutoff for transactions is:
11:59 PM UTC on December 31
Any trades executed after this time will count toward the following tax year. Be sure to review your activity before this deadline — especially if you're planning year-end tax-loss harvesting or profit-taking strategies.
Double-check transaction timestamps in your account history to ensure accuracy in your records.
Frequently Asked Questions (FAQ)
Q: Are all crypto transactions taxable?
A: Not all — only disposals such as selling, trading, spending, or gifting trigger taxable events. Simply holding or transferring between your own wallets (without selling) is not taxed.
Q: What happens if I don’t report my crypto gains?
A: Failing to report crypto income or capital gains can lead to penalties, interest charges, or audits. The IRS receives matching data from exchanges via 1099 forms, so underreporting increases scrutiny risk.
Q: Will I get a 1099 form from Robinhood?
A: Yes — if you earned more than $600 in crypto rewards or sold assets during the year, Robinhood will issue either a 1099-B (sales) or 1099-MISC (rewards). These are submitted to both you and the IRS.
Q: How do I report crypto with no cost basis?
A: If cost basis isn’t available (e.g., from transfers), you must calculate it yourself using purchase records or historical price data. Failure to do so may result in reporting the entire sale amount as gain.
Q: Does staking or yield count as taxable income?
A: Yes — staking rewards, airdrops, and other incentives are taxed as ordinary income at their fair market value when received.
Q: Can I use losses to reduce my taxes?
A: Absolutely. Capital losses can offset capital gains dollar-for-dollar. Up to $3,000 in excess losses can be deducted against ordinary income annually; remaining losses can be carried forward indefinitely.
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Final Thoughts
As cryptocurrency becomes increasingly integrated into mainstream finance, tax compliance is no longer optional — it's mandatory. With new forms like the 1099-DA rolling out in 2025 and expanded reporting on the horizon for 2026, now is the time to build strong recordkeeping habits.
Ensure you track every transaction — including purchases, sales, rewards, and transfers — and maintain accurate cost basis data. When in doubt, seek advice from a licensed tax professional familiar with digital assets.
Staying proactive today protects you tomorrow — both financially and legally.