How cryptocurrency sales and exchanges affect your taxes
Sell it, trade it, or spend it, and the IRS treats it as property with a gain or loss to report. Here is how crypto is taxed in the US, and what to line up before you file.
Crypto is taxable in the United States, and the rules are more specific than a lot of investors expect. If you sold, traded, or spent digital assets during the year, some of that activity almost certainly belongs on your return. Here is how the tax treatment works, where people get tripped up, and what to sort out before you file.
Everything starts with one classification, so start there.
How the IRS treats crypto
The IRS treats Bitcoin and other digital assets as property, not as currency. That single rule shapes the rest. Because crypto is property, selling or exchanging it produces a capital gain or loss, the same way selling a stock does.
Your rate depends on how long you held the asset before disposing of it. Held for one year or less, the gain is short-term and taxed at your ordinary income rate. Held for more than a year, it is long-term and taxed at the lower long-term capital gains rates, which are 0, 15, or 20 percent depending on your income. If your losses for the year exceed your gains, you can deduct up to $3,000 of the net loss against ordinary income and carry the remainder forward to later years.
Separately, every taxpayer has to answer the digital asset question near the top of Form 1040, whether or not any tax is owed. Answer it honestly even in a year when you only bought and held.
Cost basis is where it starts
Your cost basis is what you paid to acquire the asset, including the fees tied to buying it. Buy one coin for $12,000 and pay a $60 exchange fee, and your basis is $12,060. When you dispose of it, your gain or loss is the proceeds minus that basis. Buy at $12,000 and sell at $13,000 and you have a $1,000 gain, even if the price dipped below what you paid at some point in between. The swings along the way do not matter for tax. Only the acquisition and the disposal do.
Acquisition fees add to basis. Fees paid when you sell come off your proceeds. That is different from ongoing investment advisory or account fees, which are not currently deductible on an individual return. Keeping records that prove your basis is the part most people neglect, and it is the part that saves money later.
Almost any disposal is a taxable event
Selling crypto for dollars is the obvious one. It is not the only one. Trading one coin for another is a disposal of the first coin, so it triggers a gain or loss even though no cash changed hands. Spending crypto on goods or services works the same way: you are treated as selling the coin at its fair market value that day, then using the dollars to make the purchase. Someone who trades often or pays for things in crypto can rack up dozens of taxable events without ever moving money to a bank.
Receiving crypto as income sits in its own bucket. Staking rewards, mining income, airdrops, and crypto paid for work are generally taxed as ordinary income at their value on the day you receive them. That value then becomes your basis if you later sell.
What reporting looks like now
For years, exchanges sent little standardized tax paperwork, and tracking everything fell entirely on the investor. That has changed. Brokers, including many centralized exchanges, now report digital asset sales to the IRS on Form 1099-DA. Gross proceeds reporting applies to dispositions made on or after January 1, 2025, so the first of these forms went out in early 2026 for the 2025 tax year. Cost basis reporting on the same form phases in for assets acquired starting January 1, 2026.
The practical effect is that the IRS now holds its own record of much of your activity, so what you report needs to line up with it. Early 1099-DA forms may show proceeds without basis, which can make a gain look far larger than it actually is. Your own records are how you fill that gap and report the correct number.
Matching your records against a 1099-DA and splitting short-term from long-term is routine work for someone who does crypto taxes full time. We'll connect you with one.
Get matched with a crypto-tax pro →One rule that still favors crypto
The wash-sale rule blocks a loss deduction when you sell a stock at a loss and buy it back within 30 days. As of 2026 that rule applies to stocks and securities and has not been extended to digital assets, so selling crypto at a loss and rebuying it shortly after is generally allowed. Proposals to close this come up regularly, so confirm the current rule before you build a plan around it.
Before you file
- Pull complete transaction history from every exchange and wallet you used, not only the ones that sent a form.
- Match your records against any 1099-DA you receive, and be ready to supply the basis the form leaves out.
- Split short-term from long-term disposals, since the two are taxed at different rates.
- Record income events such as staking, mining, airdrops, and crypto pay at their value on the day received.
- Answer the digital asset question on Form 1040, even if you only bought and held.
The reporting is less forgiving than it used to be, because it now flows to the IRS on its own. The people who have the least trouble are the ones who keep clean records through the year instead of rebuilding them in April. If your year involved several exchanges, DeFi activity, or missing basis, that is the point where a crypto-focused preparer usually pays for itself.