Understanding tax obligations for cryptocurrency in the U.S. is crucial, especially as regulations evolve. The IRS began requiring disclosure of crypto holdings in 2019, asking taxpayers to report transactions on Form 1040. Holding cryptocurrency is not a taxable event; taxes apply when it's sold, traded, or used for purchases, triggering capital gains or losses. Short-term gains are taxed at ordinary income rates, while long-term gains benefit from lower rates. Starting in 2025, new IRS policies will require wallet-by-wallet accounting for tracking basis and impose stricter reporting guidelines. Taxable events include income from mining, staking rewards, and payments received in crypto. NFTs may be taxed as collectibles, attracting higher tax rates. Significant penalties for non-compliance can include fines and even criminal charges. Hence, accurate reporting and utilizing tax software are advised. Lawmakers are also considering regulations on DeFi projects, which could impact the evolving crypto taxation landscape.

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