Let's face it: taxes are complicated enough with regular money. Throw cryptocurrency into the mix, and you might feel like you need both an accountant and a computer scientist just to file your returns. But don't worry—while crypto taxation isn't exactly simple, understanding the basics can save you from headaches (and potentially costly mistakes) down the line. Also, this article was written in May 2025, and things are changing rapidly. So bear that in mind!

The Fundamental Truth: Crypto Is Property (Usually)

The first thing to understand is how tax authorities view cryptocurrency. In the United States, the IRS made its position clear back in 2014: cryptocurrency is property, not currency. This seemingly small distinction has enormous implications, because when something is treated as property:

• Every sale or exchange becomes a taxable event

• You must track your cost basis (what you paid) for each unit

• You'll owe taxes based on the difference between your cost basis and the value when you dispose of it

This means that unlike foreign currency transactions (which have their own special rules and exemptions), virtually every crypto transaction potentially triggers tax consequences.