Short answer: In the US, the IRS treats crypto as property. Selling, spending or swapping it is a taxable disposition: you owe capital gains tax on the difference between what you received and your cost basis. Coins held one year or less are taxed at ordinary income rates; coins held longer get the 0%, 15% or 20% long-term rates. Staking and mining rewards are ordinary income when you gain control of them. Simply buying and holding is not taxable.
Crypto is property, so every disposal is a sale
IRS guidance since Notice 2014-21 treats digital assets as property rather than currency. That single rule explains most of crypto taxation: whenever you dispose of a coin, you realize a gain or loss exactly as you would when selling a stock.
A disposal is broader than selling for dollars. Trading one coin for another, paying for goods or services with crypto, and converting to a stablecoin are all dispositions. Moving coins between wallets you own is not.
- Taxable: selling for USD, crypto-to-crypto swaps, spending crypto, converting to a stablecoin.
- Generally not taxable: buying with USD, holding, transferring between your own wallets, gifting below the annual gift exclusion (the recipient inherits your basis).
- Ordinary income: staking, mining, airdrops and crypto received as pay, valued at fair market value when received.
How the gain is calculated
Gain or loss equals proceeds minus cost basis. Cost basis is what you paid, including transaction fees directly tied to the purchase. Proceeds are the fair market value received, reduced by selling fees.
If you bought the same coin at several prices, which lot you sold matters. Without specific identification records, the default is first-in, first-out (FIFO). From 2025, the IRS requires basis to be tracked per wallet or account rather than across your whole portfolio.
| Step | Amount | Note |
|---|---|---|
| Bought 0.02 BTC at $50,000 | $1,000 | Coin cost |
| Buy fee (1%) | $10 | Added to basis |
| Cost basis | $1,010 | |
| Sold 0.02 BTC at $60,000 | $1,200 | Gross proceeds |
| Sell fee (1%) | −$12 | Reduces proceeds |
| Capital gain | $178 | Proceeds $1,188 − basis $1,010 |
Short-term vs long-term rates
The holding period starts the day after you acquire the coin. Held one year or less, the gain is short-term and is taxed at your ordinary income bracket (10% to 37%). Held more than one year, it is long-term and taxed at 0%, 15% or 20% depending on taxable income.
Higher earners may also owe the 3.8% Net Investment Income Tax when modified adjusted gross income exceeds $200,000 (single) or $250,000 (married filing jointly). Most states tax capital gains as regular income on top of federal tax.
| Rate | Single | Married filing jointly |
|---|---|---|
| 0% | Up to $48,350 | Up to $96,700 |
| 15% | $48,351 – $533,400 | $96,701 – $600,050 |
| 20% | Over $533,400 | Over $600,050 |
Staking, mining and airdrops
Revenue Ruling 2023-14 says staking rewards are gross income in the year you gain dominion and control over them, meaning you can sell or transfer them. The amount is their fair market value at that moment, and that value also becomes your basis in those coins.
When you later sell rewarded coins, you have a second, separate capital gain or loss measured from that basis. Mining income from a business may also be subject to self-employment tax.
Losses: what you can deduct
Capital losses first offset capital gains of any kind. If losses exceed gains, up to $3,000 per year ($1,500 if married filing separately) can offset ordinary income, and the rest carries forward indefinitely.
The wash-sale rule in Internal Revenue Code section 1091 applies to stock and securities. Crypto treated as property has not been covered by that section, though legislative proposals have tried to extend it. Selling at a loss and repurchasing still needs a genuine sale, and rules can change, so confirm current law before relying on it.
Forms and the new 1099-DA
Individual sales go on Form 8949 and total to Schedule D. Ordinary crypto income is reported as other income or business income. Form 1040 asks every filer a yes/no digital asset question.
Brokers began issuing Form 1099-DA for 2025 transactions, reporting gross proceeds. Cost basis reporting for covered assets begins with transactions in 2026. A 1099-DA may not include basis for coins transferred in from another platform, so keep your own purchase records.
- Export trade history from every exchange and wallet each year.
- Record date, quantity, USD value and fees for each acquisition.
- Match 1099-DA proceeds to your own records before filing.
- Keep records for at least three years after filing, longer for carryforwards.
Common mistakes
Most errors come from treating swaps as non-events, forgetting fees, and double-counting income that was already taxed when received as staking rewards.
- Ignoring crypto-to-crypto trades because no dollars moved.
- Using portfolio-wide average cost instead of per-wallet basis.
- Leaving fees out of basis or proceeds.
- Reporting a 1099-DA with no basis as a 100% gain.
- Forgetting state income tax on gains.
Official sources and limitations
Policy sources consulted November 7, 2026. Platform terms, regional eligibility, payment screens and account notices take precedence over this guide. Example amounts are hypothetical, not guaranteed payouts. This is educational guidance, not personalized financial or tax advice.
Run your own numbers
Use your own statement amounts and measured rates instead of treating a calculator default as an official payment quote.
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