What are the latest rules for reporting cryptocurrency gains/losses?

Here’s what HIVE AI had to say about “What are the latest rules for reporting cryptocurrency gains/losses?”:

Latest rules for reporting cryptocurrency (digital asset) gains and losses

What triggers a taxable gain or loss

• Selling crypto for fiat, swapping one token for another, spending crypto on goods/services, or otherwise disposing of a digital asset are taxable events that you must report; use Form 8949 to compute gain/loss and Schedule D to summarize. If you were paid in crypto for services, that is ordinary income at receipt, and later sale produces capital gain/loss from that basis. 1

How to compute your gain or loss

• Your gain/loss equals amount realized minus your adjusted basis; holding period determines short-term vs long-term. Example: swapping Token A (basis $1,000) for Token B worth $3,000 after 3 years yields $2,000 long‑term capital gain. If you received crypto as payment for services at $10,000 and sold two months later for $12,000, report $10,000 as ordinary income and $2,000 as short‑term capital gain. 2

Which forms to file

• Report dispositions of digital assets on Form 8949 and Schedule D. If you received crypto as wages, include it in Form W‑2 wages; if you were paid in crypto as an independent contractor or you sell to customers in a trade or business, report on Schedule C. Gifts of digital assets may require Form 709. 1

Capital vs. ordinary character

• Most individual investors treat crypto as a capital asset; gains/losses are capital. Ordinary treatment can apply in specific cases (for example, dealer inventory, certain derivatives, or other ordinary-asset contexts). The new Form 1099‑DA framework instructs brokers and taxpayers to determine short‑term vs long‑term and identify when any portion is ordinary under normal property rules. 3

Special situations you should know

Hard forks and airdrops

• If a hard fork results in you actually or constructively receiving new coins (for example, Bitcoin Cash from the 2017 Bitcoin fork), you have gross income upon receipt under section 61; the distribution mechanics (airdrop or otherwise) don’t change that result. 4

Protocol upgrades without new coins

• A protocol upgrade that changes consensus (for example, a move to proof‑of‑stake) but does not grant you new units does not cause you to realize gain/loss or income. 5

Tokens that plummet in value or become “worthless”

• A mere decline in value is not deductible. Section 165(g) “worthless securities” does not apply to typical cryptocurrencies, and an individual generally can’t claim a deduction until there’s a closed and completed transaction (such as a sale or abandonment that fixes the loss). 6

Broker reporting you’ll start to see

Form 1099‑DA and custodial platform reporting

• Treasury/IRS issued final regulations requiring certain brokers that take possession of customers’ digital assets (custodial exchanges, hosted wallet providers, kiosks, some payment processors) to report sales and exchanges. Decentralized/non‑custodial brokers are not yet covered; Treasury/IRS plan separate rules. The regulations also include basis determination and backup withholding rules and provide transitional/penalty relief. 7

Basis reporting timing and special de minimis rules

• Basis reporting by certain brokers applies to transactions occurring on or after January 1, 2026. The rules allow optional aggregate reporting for certain stablecoin and NFT sales after de minimis thresholds, and require real estate professionals to report fair market value of digital assets paid in closings on or after January 1, 2026. Keep your own detailed records until basis reporting fully phases in. 7

Statutory background from the Infrastructure Investment and Jobs Act

• Congress amended sections 6045/6045A to include digital assets in broker reporting and transfer statement rules and authorized Treasury to define “digital asset.” These provisions underpin the Form 1099‑DA regime. 8

Practical tips to stay compliant

• Keep lot-level records (date acquired, cost basis, fees, FMV at disposal, and disposition method like FIFO/Specific ID) to support Form 8949. 1
• Expect 1099‑DA from custodial platforms; reconcile them to your records and correct any basis gaps, especially for assets moved in from other wallets or exchanges. 7
• If you’re paid in crypto, capture the FMV at receipt for income and basis; subsequent sales go on Form 8949/Schedule D. 1

Edge cases and open questions

• The IRS continues to refine guidance on digital assets (including NFTs and collectibles treatment), but the current filing mechanics remain: report income, compute gains/losses on Form 8949, and apply capital vs ordinary rules based on your facts. 9

If you share how you used or earned your crypto (investing, DeFi, staking, payments, NFTs), I can map your transactions to the exact forms and characterize gains/losses under these rules.

Sources

1 – IRS Newsroom – IR-2024-18 📄 Summarize
2 – IRS – Instruction 8949 Instructions for Form 8949, Sales and Other Dispositions of Capital Assets 📄 Summarize
3 – IRS – Instruction 1099-DA Instructions for Form 1099-DA, Digital Asset Proceeds From Broker Transactions 📄 Summarize
4 – CCA 202114020 📄 Summarize
5 – CCA 202316008 📄 Summarize
6 – CCA 202302011 📄 Summarize
7 – IRS Newsroom – IR-2024-178 📄 Summarize
8 – Announcement 2023-2 📄 Summarize
9 – IRS.gov – Digital assets 📄 Summarize

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