Crypto activity is taxable in most major jurisdictions, but the how differs by country, asset type, and whether gains are capital or ordinary income. Below is a practical, source-driven guide for 2025 covering the United States, United Kingdom, Canada and China—what is taxed, where to report it, and common pitfalls to avoid.
Key principles that apply broadly
- Crypto is not “tax-free.” In the U.S., the IRS classifies digital assets as taxable; you must answer a digital assets question and report gains/losses or income even if you received no 1099.
- Multiple taxable events. Selling for fiat, swapping one coin for another, or using crypto to pay for goods/services are usually taxable events; mining/staking rewards are generally income on receipt. (See country specifics below.)
- Records matter. Keep date/time, cost basis, fair market value at disposal/receipt, and fees. Many countries require you to reconcile totals on capital gains schedules.
United States (IRS)
1) Who must file
The IRS requires every filer to answer the Digital Assets question on Form 1040 (and certain business returns). If you sold, exchanged, or were paid in digital assets—or received rewards/airdrops—you must check “Yes” and report.
2) What is taxable and where to report
- Capital disposals (sell crypto for USD, or swap coin-to-coin): report each disposition on Form 8949 and summarize on Schedule D. Short- vs. long-term rates apply based on holding period.
- Income (mining, staking, airdrops, interest, payments for services): include at fair market value when received as ordinary income (for individuals, typically Schedule 1 or Schedule C if a trade/business). The IRS emphasizes you must report even without a 1099.
3) Broker reporting (new)
From Jan 1, 2025, Treasury/IRS regulations begin phasing in broker reporting for digital assets (Form 1099-DA for gross proceeds; basis reporting expected from 2026). Non-reporting and false returns can trigger significant civil and criminal penalties.
4) U.S. persons abroad
Citizens and resident aliens are taxed on worldwide income and still answer the digital-assets question. State tax may also apply depending on your state of residency.
U.S. filing checklist
- Reconcile every disposal on Form 8949 (date acquired/sold, proceeds, basis, gain/loss).
- Report mining/staking rewards at receipt value; track later gains/losses on disposition.
- Keep exchange/wallet statements to support basis and answers to the digital-assets question.
United Kingdom (HMRC)
1) Framework
HMRC treats most individual crypto disposals under Capital Gains Tax (CGT) rules; some receipts (e.g., mining, staking, employment income) fall under Income Tax. HMRC maintains a dedicated Cryptoassets Manual and public guidance collections updated through 2025.
2) What to report and where
- Disposals (sell, swap, spend, gift to non-spouse): calculate gains using allowable costs and the share-pooling rules; report via Self Assessment and the Capital Gains pages (online SA return or paper SA108). HMRC provides step-by-step guidance on when and how to report CGT for crypto.
- Receipts as income (mining as a hobby vs business, staking, airdrops for services): follow HMRC’s income guidance; if a trade exists, profits fall under Income Tax and potentially Class 2/4 NICs.
3) Residency matters
UK tax liability follows residence; HMRC clarifies that a UK-resident beneficial owner is taxable on transactions subject to UK tax, regardless of where the exchange is based.
UK filing checklist
- Keep acquisition/disposal records and fees; apply share pooling when computing gains.
- Use Self Assessment CGT pages; declare any crypto received as income in the relevant boxes.
Canada (CRA)
1) Framework
The CRA treats crypto as a commodity. Profits may be capital gains (investment) or business income (trading/mining as a business). For capital gains, 50% of the gain is taxable (and 50% of capital losses are deductible against capital gains). CRA provides official guidance and references Schedule 3 and Guide T4037 for reporting.
2) What to report and where
- Capital gains/losses from disposals: calculate adjusted cost base (ACB), proceeds, and expenses; report on Schedule 3 and carry to your T1 return.
- Business income (frequent trading, commercial mining/staking): report as income from business/profession using normal rules; expenses may be deductible if incurred to earn income.
3) Records & compliance
The CRA explicitly requires detailed records for each transaction and reminds taxpayers that information sharing can trace crypto activity.
Canada filing checklist
- Determine if your activity is investment vs business; apply the 50% inclusion rate for capital gains.
- Use Schedule 3; retain ACB worksheets and exchange/wallet statements.
China (Mainland)
1) Trading status
On Sept 24, 2021, the People’s Bank of China and other agencies declared all cryptocurrency transactions illegal; overseas exchanges are barred from serving users in mainland China; financial institutions and internet firms may not facilitate crypto trading.
2) Tax context
While domestic crypto trading is prohibited, tax residency rules still matter: resident individuals in China are generally taxed on worldwide income under the Individual Income Tax (IIT) Law; non-residents are taxed on China-source income only. If a China tax resident earns crypto-related income abroad (e.g., from foreign employment or investments), that income can fall within IIT scope—even though domestic crypto trading is banned. Professional summaries and official texts describe the resident/worldwide rule and the 183-day thresholds.
Compliance note
Given the trading ban and complex residency rules (including the “six-year rule” for certain non-domiciled individuals), residents and expatriates should seek local tax advice before any disclosure—particularly where foreign-source investment income may be implicated.
Common mistakes that trigger audits or penalties
- Answering the return “digital assets”/“crypto” question incorrectly. The IRS requires a yes/no response and expects matching schedules when “Yes” is ticked.
- Ignoring swaps. Coin-to-coin exchanges can be taxable (U.S., UK, Canada)—even with no cash deposited to your bank.
- Reporting only what arrived on a 1099. U.S. law requires reporting all taxable transactions regardless of whether you receive an information return.
- Treating business-like activity as capital by default. CRA may recharacterize frequent trading/mining as business income.
- Using unsubstantiated fair values. Keep time-stamped market prices and fee receipts; reconcile with exchange exports. (All jurisdictions expect contemporaneous records.)
A 7-step reporting workflow for 2025
- Inventory your activity (trades, swaps, spending, rewards, mining/staking, airdrops). Note wallet/exchange per transaction.
- Classify each line (capital vs income). Use country tests: IRS property rules; HMRC CGT vs Income; CRA capital vs business.
- Compute basis and proceeds with fees. Apply pooling/ACB rules where relevant (UK share-pooling; Canada ACB).
- Map to forms:
- U.S. Form 8949 + Schedule D; income on Schedule 1/C; answer the digital-assets question.
- UK Self Assessment CGT pages/SA108; income sections per HMRC guidance.
- Canada Schedule 3 (capital) or business schedules.
- Reconcile to information returns (e.g., U.S. 1099-DA from 2025, exchange exports). Investigate gaps.
- Retain documentation (CSV exports, wallet explorers, FMV sources).
- File and pay on time; consider estimated payments if activity is large.
Bottom line
In 2025, authorities are tightening crypto tax reporting—from the IRS’s digital-assets question and 1099-DA regime to HMRC and CRA guidance that treats crypto disposals and income much like traditional assets. China, by contrast, enforces a domestic trading ban even as its tax law subjects residents’ worldwide income to IIT. Treat every disposal and reward as potentially reportable, keep meticulous records, and map each item to the right schedule. Proper reporting is not just good practice—it is your best protection against penalties and unwanted audits.