By Harry Prabandham · Updated September 28, 2026
Tax Planning
Crypto Tax Planning: Lot Selection, Losses, Staking, and Form 1099-DA
The IRS treats crypto as property: sales and swaps realize gains, and staking rewards are income. The wash-sale rule doesn't apply to crypto in 2026.
Crypto Tax Planning: Lot Selection, Losses, Staking, and Form 1099-DA
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How is cryptocurrency taxed?
- The IRS treats digital assets as property, so selling, swapping, or spending them can realize a capital gain or loss.
- Rewards from mining, staking, and airdrops are generally ordinary income at fair market value when you gain control of them.
- Units held more than a year qualify for long-term capital gains rates.
- Form 1040 asks every filer whether they received or disposed of digital assets during the year.
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Full Guide
How is cryptocurrency taxed?
- The IRS treats digital assets as property, so selling, swapping, or spending them can realize a capital gain or loss.
- Rewards from mining, staking, and airdrops are generally ordinary income at fair market value when you gain control of them.
- Units held more than a year qualify for long-term capital gains rates.
- Form 1040 asks every filer whether they received or disposed of digital assets during the year.
Does the wash-sale rule apply to crypto?
- Section 1091 applies to stock and securities, and as of September 2026 it hasn't been extended to crypto held as property.
- Bills to apply wash-sale rules to digital assets have been introduced in Congress, so the rule could change.
- Net capital losses offset gains plus up to $3,000 of ordinary income a year, with the rest carried forward.
- Price swings can create harvesting opportunities at any time of year, not only in December.
How does lot selection work?
- Since 2025, basis must be tracked wallet by wallet or account by account rather than pooled across all holdings.
- You can specifically identify which units you sell; otherwise units are treated as first in, first out within that wallet or account.
- At a broker, specific identification generally has to be communicated by the time of the sale.
- Selling higher-basis lots can reduce a current gain but leaves lower-basis lots for later.
What does Form 1099-DA change?
- Custodial brokers report gross proceeds on Form 1099-DA for sales on or after January 1, 2025.
- Basis reporting starts for certain sales on or after January 1, 2026, generally for assets acquired in that account from 2026 on.
- Self-custodied wallets and most decentralized transactions aren't broker-reported but remain taxable.
- Missing basis on a 1099-DA can overstate gains, so your own records matter.
How are staking, DeFi, and NFTs taxed?
- Staking rewards are income when you gain dominion and control over them, under Revenue Ruling 2023-14.
- Token swaps, including many liquidity pool deposits and withdrawals, may be taxable exchanges, and guidance remains limited.
- The IRS may treat an NFT as a collectible, taxed at up to 28% on long-term gains, when its underlying asset is a collectible.
- Creators generally report NFT sales and royalties as ordinary income.
How does donating crypto work?
- Donating crypto held over a year to a charity that accepts it generally avoids the gain and allows a fair-market-value deduction.
- Claims over $5,000 require a qualified appraisal, because the IRS doesn't treat crypto as a publicly traded security for this rule.
- Deductions are subject to AGI limits and, starting in 2026, the 0.5% of AGI floor for itemizers.
- Many donor-advised funds accept crypto when a charity can't.
Key takeaways
- Crypto is property for tax purposes, and rewards are ordinary income when received.
- The wash-sale rule doesn't reach crypto today, though proposals would change that.
- Basis is tracked per wallet or account, and 1099-DA basis reporting began in 2026.
- Records and specific identification drive the result; confirm reporting with your CPA.
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