By Harry Prabandham · Updated September 27, 2026
Tax Planning
How Cryptocurrency Is Taxed in the U.S.
The IRS treats crypto as property: disposing of it can trigger capital gain or loss, and crypto received for work or staking is ordinary income.
How Cryptocurrency Is Taxed in the U.S.
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How does the IRS tax cryptocurrency?
- For federal tax purposes, cryptocurrency and other digital assets are property, not currency.
- Selling, swapping, or spending crypto is a disposal that produces a capital gain or loss measured against your cost basis.
- Crypto you receive for work, mining, staking, or an airdrop is generally ordinary income at its fair market value when you gain control of it.
- Assets held more than one year get long-term capital gains rates; shorter holdings are taxed at ordinary income rates.
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Full Guide
How does the IRS tax cryptocurrency?
- For federal tax purposes, cryptocurrency and other digital assets are property, not currency.
- Selling, swapping, or spending crypto is a disposal that produces a capital gain or loss measured against your cost basis.
- Crypto you receive for work, mining, staking, or an airdrop is generally ordinary income at its fair market value when you gain control of it.
- Assets held more than one year get long-term capital gains rates; shorter holdings are taxed at ordinary income rates.
Which crypto transactions are taxable?
- Taxable: selling for dollars, trading one token for another, and paying for goods or services with crypto.
- Generally not taxable: buying crypto with dollars, holding it, and moving it between wallets or accounts you own.
- Gifting crypto is not a sale for the giver, though gifts above the annual exclusion ($19,000 per recipient in 2026) require a gift tax return.
- Donating long-held crypto to a qualified charity can avoid the gain, but claims above $5,000 generally need a qualified appraisal.
Crypto received as pay or rewards
- Crypto paid as wages is reported on your W-2 and is subject to withholding and payroll taxes like cash pay.
- Crypto paid to a contractor or freelancer is self-employment income, generally subject to self-employment tax as well as income tax.
- Revenue Ruling 2023-14 says staking rewards are income when you gain dominion and control over them, not when you later sell.
- The value you report as income becomes your cost basis, so tracking it avoids paying tax twice on the same amount.
How do you track basis, and what changed in 2025 and 2026?
- Starting January 1, 2025, basis must be tracked wallet by wallet or account by account rather than pooled across everything you own.
- You may use specific identification if you identify the units sold at the time of sale; otherwise first-in, first-out applies within each wallet.
- Custodial brokers report gross proceeds on Form 1099-DA for sales starting in 2025, and basis for covered assets acquired starting in 2026.
- Congress repealed the rule that would have required DeFi platforms to issue 1099-DAs, but those transactions remain reportable by you.
Do wash-sale rules and collectibles rates apply?
- The wash-sale rule covers stock and securities; as of September 2026 it has not been extended to crypto held as property, though bills propose it.
- Net capital losses offset gains and up to $3,000 of ordinary income per year, with any excess carried forward.
- Under Notice 2023-27, an NFT whose underlying asset is a collectible, such as art or gems, may face the 28% long-term collectibles rate.
- Transaction and gas fees on trades generally adjust basis or proceeds rather than creating a separate deduction for investors.
Reporting on your tax return
- Capital gains and losses go on Form 8949 and Schedule D, whether or not you received a 1099-DA.
- Form 1040 asks every filer a yes-or-no digital asset question, which covers receiving, selling, or exchanging crypto.
- Business and self-employment crypto income generally goes on Schedule C, and other income such as staking on Schedule 1.
Key takeaways
- Treat every crypto disposal as a potential tax event and keep dates, amounts, and values for each wallet.
- Income from staking, mining, or services is taxed when received, and that value becomes your basis.
- Broker reporting is expanding, but older holdings and DeFi activity still depend on your own records.
- Crypto tax rules are evolving; this is educational only, so confirm your situation with a CPA before filing.
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