How do I answer the digital assets question on my 2025 tax return?

Every taxpayer must answer the digital assets question on Form 1040, regardless of whether they own any crypto. The question reads: "At any time during 2025, did you receive (as a reward, award, or payment for property or services); or sell, exchange, or otherwise dispose of a digital asset (or a financial interest in a digital asset)?"

Answer YES if you:

• Sold, traded, or exchanged any cryptocurrency (Bitcoin, Ethereum, altcoins, etc.)
• Received crypto as payment for goods or services
• Received staking rewards, mining income, or interest from crypto lending
• Received an airdrop of new tokens
• Sold an NFT for any amount
• Used crypto to purchase something (treated as a taxable sale)
• Received crypto as a gift and then disposed of it

Answer NO if you:

• Only bought and held crypto with no sales or exchanges
• Transferred crypto between your own wallets with no third party involved
• Simply held crypto in an exchange account without any transactions
• Did not own, transact in, or receive any digital assets at any point in 2025

What happens after you answer YES?

You must report specific transactions. For 2025, brokers (exchanges like Coinbase, Kraken, etc.) are now required to issue Form 1099-DA reporting your crypto sales. Even if you don't receive a 1099-DA, you are still required to report all transactions.

Use Form 8949 to report each sale or exchange and calculate your gain or loss. Aggregate totals flow to Schedule D.

Tax rates: Crypto held more than one year is taxed at long-term capital gains rates (0%, 15%, or 20%). Held one year or less means short-term, taxed as ordinary income.

Warning: Answering NO when you had transactions is a red flag for IRS audits. The IRS cross-references 1099-DA data from exchanges. Answer honestly and report all transactions, including small ones.