Illinois has recently signed into law new tax regulations that apply to digital assets, including cryptocurrencies such as Bitcoin and Ethereum. This is an opportune moment for the Vietnamese community in Illinois — many of whom hold or trade crypto — to understand their tax obligations under state law.
This article will explain in detail: what the new law changes, who is affected, and what you need to do to avoid penalties from lack of information.
Previously the state relied on voluntary self-reporting by residents — now exchanges submit data directly to the state, so overlooking transactions will be much easier to detect.
First: Why Is Crypto Subject to Taxation?
Many people think cryptocurrency is "private money" and therefore does not need to be reported for taxes. This is completely wrong under U.S. federal law.
Since 2014, the Internal Revenue Service (IRS) has classified cryptocurrency as property, not currency. This means that every time you sell, exchange, or use crypto to purchase goods, you are conducting a taxable transaction — similar to selling stock or selling a house.
Illinois has previously followed federal guidance. The law recently signed adds additional reporting requirements at the state level, meaning that in addition to federal tax returns, Illinois residents must provide clearer disclosure to the state.
What Does the New Law in Illinois Change?
According to information from the Illinois Department of Revenue, the new law requires:
- Illinois taxpayers must report all digital asset transactions during the tax year, including capital gains and capital losses.
- Cryptocurrency exchanges operating in Illinois must submit transaction reports to the state — similar to how banks submit reports on savings account interest.
- Penalties for failure to report have increased, potentially reaching 20 percent of unpaid taxes plus accumulated monthly interest.
In simpler terms: previously the state relied mainly on voluntary self-reporting by residents. Now the state has direct data from exchanges, so overlooking transactions will be much easier to detect.
Real-World Example: Tuấn and His Bitcoin Profit
Tuấn, 38 years old, lives on Argyle Street — the Vietnamese neighborhood in Chicago — and purchased 0.5 Bitcoin in 2022 for $10,000 (that is, $20,000 per Bitcoin). In early 2025, he sold that Bitcoin for $25,000.
Tuấn has a capital gain of $15,000. This amount must be reported on both the federal tax return and — under the new law — on the Illinois state tax return.
If Tuấn held the Bitcoin for more than one year before selling, the gain is classified as long-term capital gains, which typically has a lower tax rate than short-term gains. If held for less than one year, the gain is taxed as ordinary income — a higher rate.
In Illinois, capital gains income is taxed at a flat state income tax rate of 4.95 percent (according to the Illinois Department of Revenue for tax year 2025), applied in addition to any federal taxes owed.
What Types of Transactions Must Be Reported?
This is a point where many people become confused. Taxation is not limited to when you "cash out to dollars." According to the IRS and current guidelines:
- Selling crypto for USD — for example, selling Bitcoin for dollars in a bank account.
- Exchanging one cryptocurrency for another — for example, trading Ethereum for Solana is also a taxable event.
- Using crypto to purchase goods or services — for example, paying for services in Bitcoin.
- Receiving crypto as a reward or income — for example, receiving rewards from staking (holding coins to earn interest) or airdrops (receiving free coins from a project).
Transferring crypto between your own wallets is not a taxable event — provided you do not sell or exchange it.
Special Considerations for the Vietnamese American Community
Vietnamese Americans in Illinois have certain financial habits that need attention when applying the new crypto tax law.
Sending money to Vietnam using crypto: Some people use stablecoins (cryptocurrency pegged to the U.S. dollar) to transfer money to family in Vietnam because the fees are lower than traditional services. If you buy stablecoins and then send them, technically this could be a taxable transaction if there is a gain — though usually minimal since stablecoins have little price volatility.
Buying and selling crypto with groups of friends or community: Some transactions do not go through official exchanges but happen directly between individuals (peer-to-peer). The law still applies — the reporting obligation still falls on the person conducting the transaction, even if no exchange reports it to the state.
Receiving crypto as a gift from family: If you receive crypto as a gift, you do not owe tax immediately upon receipt. However, when you later sell that crypto, the tax is calculated based on the cost basis of the person who gave it to you, not the market price when you received it. This is important — ask the person who gave it to you what price they paid.
What You Need to Do Right Now
Here are practical steps to comply with the new law:
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Gather your transaction history from all exchanges you use (Coinbase, Binance.US, Kraken, etc.). Most exchanges have a "Tax Reports" section that allows you to download reports.
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Calculate gains and losses for each transaction. You can use supporting software such as CoinTracker or Koinly — two popular tools designed to generate tax reports compatible with IRS filings.
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Fill out the federal tax return using Form 8949 and Schedule D, then transfer the results to the Illinois state tax return (Form IL-1040).
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Consult a tax professional with experience in digital assets if you have many transactions or large amounts. Not all accountants are familiar with crypto law — ask directly before hiring.
Do's and Don'ts
- Do: Keep all invoices, transaction history, and information about original purchase prices (cost basis) from the start.
- Do: Report even if you have losses — capital losses can be used to offset other gains, helping reduce your total tax liability.
- Do: File on time — the usual deadline is April 15 each year, or October 15 if you request an extension.
- Don't: Fail to report because you think "small amounts nobody will know about" — exchanges now send Form 1099-DA directly to the IRS and state.
- Don't: Confuse "not yet sold for cash" with "no tax obligation" — exchanging one coin for another is still a taxable event.
Frequently Asked Questions
If I buy crypto but haven't sold it, do I have to pay taxes?
No. Tax obligations only arise when you conduct a transaction such as selling, exchanging, or spending crypto. Simply holding it is not a taxable event.
If I use a foreign exchange that doesn't operate in the U.S., what happens?
Your tax obligation applies to you as a U.S. taxpayer — regardless of where the exchange is located. The IRS requires reporting all income and capital gains worldwide (worldwide income). Using a foreign exchange is not a valid way to avoid taxes.
Can I file on my own or do I need to hire an accountant?
If you have only a few simple transactions (buying and selling Bitcoin once), you can completely file on your own using software like TurboTax or H&R Block — both have sections that support crypto. If you have many types of coins, staking, DeFi (decentralized finance), or cross-border transactions, you should find a specialist.
Cryptocurrency tax law is changing rapidly at both federal and state levels. Illinois is moving toward a model of stricter oversight, and the Vietnamese American community — traditionally active in investing and international money transfers — needs to understand these rules to protect their finances. Understanding correctly, reporting accurately, and not letting lack of information create unnecessary financial burdens.