Crypto tax tips for US investors

A letter from the IRS is the expensive way to find out your crypto records were thin. The cheaper way is to get them in order before you file. Most of the work is bookkeeping, not tax theory, and the rules that matter are few enough to keep in your head.

Here is where the money actually moves, and where people lose it without noticing.

Keep records before you need them

Every taxable event needs three facts: the date you acquired the coin, what you paid for it including fees, and what you received when you disposed of it. That is your cost basis and your proceeds, and the gap between them is your gain or loss.

Exchanges let you export a full transaction history as a CSV or spreadsheet. Pull it for every account, including ones you stopped using. A missing quarter in the middle of a year is what turns a short return into a long one.

Starting with the 2025 tax year, US exchanges report your gross proceeds to the IRS on Form 1099-DA, and you get a copy in early 2026. Basis reporting phases in for coins acquired from 2026 forward. Read the form carefully: the number on it is proceeds, not gain. If you report only what the form shows and leave off your basis, you will usually overpay.

If you moved coins between your own wallets, keep the records that show those were transfers, not sales. Moving crypto to a wallet you control is not a taxable event, but without proof it can read like one.

The one-year line changes your rate

How long you held a coin before selling decides which rate applies. Held a year or less, the gain is short-term and taxed as ordinary income at your marginal rate. Held more than a year, it is long-term and taxed at 0, 15, or 20 percent for most filers.

The clock starts the day after you acquire the coin and runs through the day you dispose of it. A sale one day short of a year is still short-term, so the exact dates are worth checking before you sell.

Trading one coin for another counts as a disposition even when no dollars reach your bank. Swapping ETH for SOL is a sale of the ETH at its value that day, and spending crypto on goods works the same way. There is no like-kind exception for this.

If you hold a gain and you are close to the one-year mark, a few days of patience can move you from the ordinary rate to the long-term rate. If you hold a loss, selling it can offset other capital gains and up to $3,000 of ordinary income a year, with any excess carried into future years.

Borrowing against crypto

Taking out a loan is not income, so borrowing dollars against crypto you already hold is generally not a taxable event by itself. You still own the coins and you have not disposed of anything.

The risk lives in the collateral. If the price drops and the lender liquidates your coins to cover the loan, that liquidation is a sale, with a gain or loss you have to report. Separately, interest you earn from lending your crypto out is taxable income the year you receive it.

This corner of the rules is thinner than the rest, and treatment can turn on the specific terms of the arrangement. Keep the loan agreement and every liquidation record so you can show what happened.

Donating crypto to charity

Give appreciated crypto you have held more than a year directly to a qualified 501(c)(3), and you can generally deduct its fair market value on the day of the gift and skip the capital gains tax you would owe if you sold first. Selling and then donating the cash gives up that second benefit.

Two conditions gate the deduction. You have to itemize, and the standard deduction is high enough that most filers do not. And once a single non-cash gift is worth more than $5,000, you need a qualified appraisal and a Form 8283 signed by the charity. A screenshot of the price on the day is not an appraisal.

Gifting coins to a person is a different matter. There is no charitable deduction, the recipient generally inherits your original cost basis, and a gift above the annual exclusion can trigger a gift tax return even when no tax is owed.

When to bring in a pro

A simple year with a handful of trades is something you can file yourself. The years that go wrong are the ones with several exchanges, DeFi activity, staking or airdrops, missing basis, or coins you have held since before you kept records.

A specialist earns the fee by reconciling all of that into one set of numbers you can defend, and by knowing which prior-year mistakes are worth amending and which to leave alone. If you already have unreported crypto from past years, fixing it before the IRS asks is almost always cheaper than answering a notice later.

The tax rules for crypto are not the hard part. The records are. Get those right for the current year while it is fresh, and every return after this one gets easier.