How is crypto taxed in the US? The IRS basics, explained
US tax law treats crypto as property, not money, which is why swapping, spending and earning coins can all create a tax bill. General education, not tax advice.
Education only, not investment, tax or legal advice. Crypto-assets are high-risk — risk disclosure.
The short answer
The IRS treats crypto and other digital assets as property. Selling, swapping or spending them can trigger a capital gain or loss, while coins you earn (pay, mining, staking, airdrops) count as ordinary income at their US dollar value when received. Buying and simply holding is not taxable.
Key takeaways
- Selling for dollars, swapping one coin for another and paying for goods or services can all be taxable; buying with dollars and moving coins between your own wallets are not.
- Coins received as pay, mining, staking or airdrop rewards are ordinary income at their dollar value when you gain control of them.
- Holding more than one year before selling usually means a lower long-term capital gains rate.
- Brokers now report digital asset sales on Form 1099-DA, but you must report your transactions whether or not you get one.
Is crypto money or property for US taxes?
For US federal income tax, the Internal Revenue Service (IRS) says digital assets are property, not currency1. Its tax definition is broad: any digital representation of value recorded on a cryptographically secured distributed ledger, such as a blockchain, or similar technology. That covers cryptocurrencies like bitcoin, stablecoins and NFTs1.
The rule goes back to IRS Notice 2014-21, published in March 2014, which said virtual currency is treated as property and that the general tax principles for property transactions apply to it2. In everyday terms, a coin is handled much like a share of stock: what matters is what you paid and what it was worth when you got rid of it.
Two terms come up constantly. Your basis (or cost basis) is what you paid to acquire a coin, in US dollars, including fees and commissions3. Your gain or loss is the difference between what you received when you disposed of it and that basis3.
Which crypto transactions are taxable?
Because crypto is property, a tax event usually happens when you dispose of it or when you receive it as income. Owning it, by itself, is not taxable. The IRS's own instructions for the digital asset question on Form 1040 give the clearest split13.
Common crypto actions and how the IRS treats them (federal, general rules) Source: [3]
| What you did | Taxable? | How it is treated |
|---|---|---|
| Bought crypto with US dollars | No | Not a reportable transaction on its own |
| Held crypto without trading | No | No tax until you dispose of it |
| Moved coins between your own wallets | No | Not a taxable event |
| Sold crypto for dollars | Yes | Capital gain or loss |
| Swapped one coin for another | Yes | Capital gain or loss on the coin given up |
| Paid for goods or services with crypto | Yes | Capital gain or loss on the coin spent |
| Got paid in crypto for work | Yes | Ordinary income at dollar value when received |
| Received mining, staking or airdrop rewards | Yes | Ordinary income at dollar value when received |
The swap row surprises many beginners: exchanging one coin for another, or spending crypto, is a disposal of the first coin even though no dollars changed hands3.
Figure · The life of a coin, for tax purposes
- 01Acquirecost plus fees = basis
- 02Holdclock starts next day
- 03Disposesell, swap or spend
- 04Gain or lossvalue received minus basis
How do you work out a gain or loss?
The formula is simple: what you received, in dollars, minus your basis. If you got another coin or a service instead of dollars, you use the fair market value of what you received3.
Coins held one year or less produce a short-term gain, taxed as ordinary income at graduated rates. Coins held more than one year produce a long-term gain, taxed at 0%, 15% or 20% depending on your taxable income4. The holding period starts the day after you acquire the coin3.
Worked example
Illustrative example: one purchase, two exit dates
You buy 0.5 units of a token for $1,000 and pay a $10 fee. Your basis is $1,010, because acquisition fees are added to basis.
Eight months later you sell the 0.5 units for $1,400. Your gain is $1,400 − $1,010 = $390, and it is short-term because you held for one year or less.
If you had instead swapped the token for another coin worth $1,400 on that day, the gain would still be $390. If you had waited more than a year, the same $390 would be a long-term gain. All figures are made up for illustration.
Bought the same coin at different prices? The IRS lets you pick specific units if your records show each unit's date, basis and value; otherwise units count as sold first in, first out3.
Is staking or mining income taxable?
Yes. Coins you earn are ordinary income. Notice 2014-21 says the fair market value of mined coins on the day you receive them is included in gross income2, and mining run as a business can also be subject to self-employment tax2.
For staking, Revenue Ruling 2023-14 says rewards are income in the tax year you gain dominion and control over them, measured at their fair market value at that date and time5. Airdrops of new coins after a hard fork are also ordinary income at their value when received3.
Worked example
Illustrative example: a staking reward
You receive 0.02 tokens in staking rewards at a moment when one token is worth $3,000. You report $60 of ordinary income (0.02 × $3,000). That $60 also becomes your basis in the 0.02 tokens, so if you later sell them for $75 you have a further $15 capital gain. Figures are made up for illustration.
Being paid in crypto for work follows the same logic: the dollar value when received is income, and that value becomes your basis3. Employers who pay wages in crypto must treat them as wages for withholding and payroll taxes2.
What is Form 1099-DA and what do you have to report?
Form 1099-DA is a new information return on which brokers report digital asset sales to you and to the IRS. Under rules created by the Infrastructure Investment and Jobs Act, brokers report gross proceeds for transactions from 1 January 2025 and, for certain transactions, basis from 1 January 20261. Under the 2026 instructions, brokers do not have to report a customer's qualifying stablecoin sales if that customer's total proceeds from them for the year do not exceed $10,000, or specified NFT sales if those total proceeds do not exceed $6006.
One planned expansion was cancelled. A December 2024 IRS rule on broker reporting by certain decentralised-finance (DeFi) "trading front-end" services8 was disapproved by Congress in Public Law 119-5, signed on April 10, 2025, so it has "no force or effect"9. Form 1099-DA reporting by brokers is separate and still applies1.
Risk warning
No form does not mean no tax
The IRS says you must report all income, gains and losses from digital asset transactions whether or not you receive a Form 1099-DA7. Trades on platforms that do not issue the form, or coins you moved in from elsewhere, are still your responsibility.
Where crypto shows up on an individual return
- 1
Answer the digital asset question
Form 1040 asks yes or no whether you received digital assets as a reward or payment, or sold, exchanged or otherwise disposed of any during the year1.
- 2
List sales and swaps on Form 8949
Each disposal of a coin held as a capital asset goes on Form 8949, with dates, proceeds and basis1.
- 3
Report earned crypto as income
Staking, mining and similar rewards go on Schedule 1 as ordinary income; business activity goes on Schedule C1.
- 4
Keep the records
The IRS expects you to keep records of purchases, sales, dollar values and basis1.
What mistakes do beginners make with crypto taxes?
Common beginner mistakes
Thinking only cash-outs count
Swapping coins and spending crypto are disposals too.
Forgetting fees in the basis
Acquisition fees and commissions are part of your basis, which lowers your gain. Leaving them out means overpaying.
Ignoring small rewards
Staking and other rewards are income when you gain control of them, even if each payout is tiny.
Treating own-wallet transfers as sales
Moving coins between your own wallets is not taxable, but keep records so your basis follows the coins.
Relying on the 1099-DA alone
Basis reporting only started for certain transactions in 20261, so the form may not show basis for every coin. You are responsible for the full, correct figures.
Frequently asked questions
Do I owe tax if my crypto went up but I did not sell?
No. Under the general property rules, an increase in value is not taxed until you dispose of the coin by selling, swapping or spending it3.
Is buying crypto with a credit card or bank transfer taxable?
Buying with US dollars is not a taxable event on its own3. It does start the clock on your holding period and sets your basis, so keep the record.
What if I received crypto as a gift?
Can crypto losses reduce my tax bill?
Yes. Capital losses offset capital gains, and net losses can offset up to $3,000 of other income a year, with the rest carried forward4.
The bottom line
US tax law treats crypto as property: disposing of it creates a capital gain or loss, and earning it creates ordinary income at its dollar value when received. Track your basis, dates and every swap, and report everything whether or not a Form 1099-DA arrives. Rules are still evolving, so check the IRS digital assets page or a qualified professional before you file. This is general information, not tax advice.
Sources
- Digital assets (page last reviewed or updated 2 September 2026) — Internal Revenue Service, 2026 Primary source
- Notice 2014-21: guidance on virtual currency — Internal Revenue Service, 2014 Primary source
- Frequently asked questions on virtual currency transactions — Internal Revenue Service, 2026 Primary source
- Topic no. 409, Capital gains and losses — Internal Revenue Service, 2026 Primary source
- Revenue Ruling 2023-14 (staking rewards), 2023-19 I.R.B. 837 — Internal Revenue Service, 2023 Primary source
- Instructions for Form 1099-DA (2026) — Internal Revenue Service, 2026 Primary source
- Understanding your Form 1099-DA — Internal Revenue Service, 2026 Primary source
- Gross Proceeds Reporting by Brokers That Regularly Provide Services Effectuating Digital Asset Sales (final regulations, 30 December 2024) — Federal Register, Internal Revenue Service, 2024 Primary source
- Public Law 119-5 (H.J. Res. 25), April 10, 2025 — U.S. Government Publishing Office (govinfo.gov), 2025 Primary source
How we checked this page: every figure above links to the numbered source it came from. Spotted an error? Tell the desk — see our editorial policy.
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