The crypto tax space saw significant developments in 2024. As 2025 ushers in new regulatory shifts (as our colleagues discussed here), tax changes may be on the horizon. In anticipation, this review revisits crypto tax developments from the past year.

1. The Treasury and IRS released two sets of final crypto reporting regulations.

The first set, in July, imposed new reporting rules for custodial brokers (which we discussed here). And the second set, in December, imposed rules for DeFi (which we discussed here).

The final regulations for DeFi apply to sales of digital assets occurring on or after January 1, 2027. However, multiple challenges could prevent them from taking effect. We previously wrote about three DeFi groups challenging them in court. More recently, they have also faced challenges in Congress.

On January 21, 2025, Senator Ted Cruz (R-TX) and Representative Mike Carey (R-OH) introduced joint resolutions of disapproval under the Congressional Review Act to nullify the regulations (linked here and here). If enacted, the regulations will not take effect and similar regulations cannot be issued later.

President Trump may also challenge the regulations. As our colleague wrote about here, on January 23, 2025, Trump issued an Executive Order directing the Treasury and other agencies to identify, within 30 days, all regulations, guidance documents, orders and other items affecting the digital asset sector. Within 60 days, recommendations must be submitted on whether these items should be rescinded, modified or adopted. The regulations could be among those targeted.

2. The IRS detailed when frozen digital asset rewards held on bankrupt digital asset platforms should be included in gross income.

As we discussed here, in November, the IRS released an Office of Chief Counsel memorandum examining a hypothetical taxpayer who received digital asset rewards, which were deposited into an account on a digital asset platform. That same year, the platform filed for bankruptcy, freezing customers’ accounts for the remainder of the taxable year. The memorandum concluded that the taxpayer must currently include rewards received before the bankruptcy in income because they had dominion and control over them.

3. The IRS reaffirmed that crypto staking rewards are taxable upon receipt.

In October, Joshua and Jessica Jarrett filed a complaint, asserting that their 2020 crypto staking rewards should not be taxable upon receipt (which we discussed here). However, IRS Notice 2023-14 states that taxpayers who stake cryptocurrency and receive rewards must include the fair market value of those rewards in gross income upon receipt.

The Jarretts previously brought a similar case against the IRS regarding rewards they received in 2019, but the case was dismissed after the IRS granted them a refund. Now, with the support of Coin Center, they are back in court to litigate this issue.

Since we last covered this topic, the IRS responded to the Jarretts’ complaint. Once again, the IRS reaffirmed its position that staking rewards are taxable upon receipt.

4. The DOJ prosecuted crypto tax evasion.

In February, the DOJ brought USA v. Ahlgren, the first crypto case with tax evasion allegations unrelated to other crimes (which we discussed here, here and here). The case concluded with the defendant pleading guilty and receiving a two-year prison sentence, setting a precedent and reinforcing the DOJ’s commitment to prosecuting crypto tax evasion.

As these developments from 2024 illustrate, the crypto tax space continues to evolve. With legislative efforts, executive scrutiny and ongoing litigation, 2025 is poised to be another pivotal year for crypto tax policy. We will continue monitoring the space and providing updates as they unfold.