The tax deadline is just one day from now, cryptocurrency holders all across the United States are scrambling to make sure their accounts are in order. While Washington is considering major changes to taxation and crypto, Anyone who has dealt, traded, or received cryptocurrency between 2024 and 2024 should ensure that their accounts are filed correctly.
To help navigate these difficult waterways, we interviewed Michael Brennan, Director of Tax Services and Head of the New York City office at CPA and the advisory company Berkowitz Pollack Brant, who provided valuable insights to cryptocurrency investors.
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The #1 Mistake That Triggers IRS Attention
“The major fault is not declaring virtual currency on a tax form,” Brennan said right at the beginning. In recent times, the IRS has stepped up the checking of cryptocurrencies a lot, “triggering unnecessary examination.
Don’t Miss the Wash Sale Loophole
One of the most unique benefits crypto investors enjoy today is the wash sale loophole. As crypto isn’t categorized as security (like bonds or stocks) according to the current IRS guidelines, crypto investors are allowed to trade their tokens for a loss and then buy them back while still claiming losses on taxes.
“Many traders often don’t see or deliberately interpret the given plan the wrong way, or they mistakenly believe that the same rules are the same for both cryptos and stocks,” explains Brennan. What does the financial analyst suggest? When the financial year ends, find out the virtual loss of one’s money that can be used as a tax deduction before April 15. This is particularly beneficial to traders who trade in high volume.
“Investors should look for assets trading at a loss and reinvest immediately to stay in the market. This technique works regardless of income level and may become more valuable during market downturns.”
The 0% Capital Gains Tax Rumor: What to Know
There’s been plenty of buzz around the possibility of a zero-cost capital gains tax for cryptocurrency coming in 2025, but there’s been no confirmation to date. Brennan recommends caution: “With no official confirmation on the 0% capital gains tax, taxpayers should proceed carefully.”
To those who want to make a profit from this possible change, Brennan recommends:
- Be patient before gaining huge profits in 2025, should the law be enacted into effect by the end of April 2026.
- Get started early to explore ways to save taxes, like trusts and legal entities
- “Keeping appreciated assets on the books could put them in a better position if the policy kicks in next year.”
Special Considerations for Non-Resident Investors
If you are a non-domiciled person subject to U.S. law, crypto tax responsibilities become more complicated. The biggest hurdle, according to Brennan, the author, is “figuring out how to properly source and classify their crypto income.”
There is no standardization of IRS form for reporting stake reward or DeFi yields, which means that investors who are not residents need to determine if their earnings are U.S.-sourced, which is a crucial aspect that affects the impact of their U.S. tax obligations.
“This combination of unclear classification and sourcing rules makes it easy to get wrong,” Brennan warns.
He advises you to keep precise records and to work with experts who are knowledgeable of digital assets as well as international tax laws.
Planning for 2026 and Beyond
In the future, Brennan recommends adopting a long-term strategy for planning, particularly if the recession is triggered by changes in tax policy, the failure of tariffs, or potential capital gains of 0% aren’t realized.
“Investors can still shift their focus to long-term strategies. That starts with revisiting portfolios to identify assets that could be sold at a loss and reinvested, reducing future tax exposure,” the author says.
Incredibly, Brennan said that cryptocurrency sometimes beats traditional currencies during downturns, and tax planning with discipline is essential.
Diversifying Income in a High-Inflation Economy
In the face of rising prices due to taxes, Brennan encourages crypto holders to think about more than just holding or mining.
“Investors can diversify income streams by mixing staking and mining with yield farming or lending on DeFi platforms.”
He noted that more capital is moving into stablecoins as well as the tokenized assets of the real world (RWAs) for investors to limit the volatility of crypto. Although interest earned from DeFi loans is tax-deductible but strategic decisions can assist investors to stay ahead of the rising cost of borrowing.
The Bottom Line
If you’re an experienced investor in crypto or you’re new to the market, the advice of Brennan’s closing remarks is simple: “Always track costs. Tariffs could inflate everything from hardware to electricity–keep detailed records of every expense.”
As the tax deadline draws hours away, now is the best time to ensure that your crypto transactions are documented properly and documented. Taxation for cryptocurrency is constantly changing, which makes an effective plan and expert guidance even more essential than before.
Be aware that this article is intended for general information only and is not intended to be tax guidance. Always seek advice from a licensed tax professional about your unique circumstances.
