Taxes on Crypto in the US: When You Pay, How Much and How to Report It

Taxes on crypto in the United States are triggered by specific events, such as selling, swapping or spending your coins, not by simply buying and holding them. The IRS treats cryptocurrency as property, so most transactions are handled like sales of stocks or real estate: you owe tax on any gain, and you can use losses to reduce your bill.

That basic idea sounds simple, but the details catch many people out. This guide explains taxes on crypto for US taxpayers in plain English: which transactions are taxable, the 2025 and 2026 rates, whether you owe tax before you withdraw money to your bank, how the new Form 1099-DA works, which forms to file and practical ways to reduce what you owe legally. It is general information, not tax advice, so check your own situation with a qualified professional.

New to crypto? Read our crypto for beginners guide first, and see what KYC means to understand why exchanges know who you are.

How the IRS Treats Cryptocurrency

The IRS has said since 2014 that virtual currency is property for federal tax purposes, not currency. That single decision drives almost every rule that follows. When you dispose of property, you compare what you received with what you paid, called your cost basis, and the difference is a capital gain or loss.

Some crypto is treated as income instead of a capital gain. If you earn crypto through work, mining, staking or certain airdrops, you generally owe ordinary income tax on its fair market value when you receive it. That value then becomes your cost basis for any later sale.

Key terms to know

A few terms come up repeatedly in crypto tax rules:

• Cost basis. What you paid for the crypto, including fees.
• Proceeds. What you received when you disposed of it, in US dollar value.
• Capital gain or loss. Proceeds minus cost basis.
• Holding period. How long you held the asset, which decides whether a gain is short-term or long-term.
• Fair market value. The dollar value of crypto at a specific moment, used for income and swaps.

What Counts as a Taxable Event

The most important thing to understand is which actions create a tax bill. The table below summarizes common situations, based on IRS guidance on digital assets.

Action	Taxable?	Type of tax
Buying crypto with US dollars	No	None until you dispose of it
Holding crypto that rises in value	No	Unrealized gains are not taxed
Moving crypto between your own wallets	No	Not a sale, though a fee paid in crypto can be a small disposal
Selling crypto for US dollars	Yes	Capital gain or loss
Swapping one crypto for another	Yes	Capital gain or loss on the coin you gave up
Spending crypto on goods or services	Yes	Capital gain or loss
Getting paid in crypto for work	Yes	Ordinary income
Mining rewards	Yes	Ordinary income, possibly self-employment tax
Staking rewards	Yes	Ordinary income when you gain control of them
Airdrops	Usually	Ordinary income once you can control the tokens
Giving crypto as a gift	Usually not for the giver	Gift tax return may be needed for large gifts
Donating to a qualified charity	Generally no	May qualify for a deduction

The swap rule surprises many people. Trading Bitcoin for Ether, or exchanging a coin for a stablecoin such as USDC, counts as selling the first coin. You owe tax on any gain even though you never touched US dollars.

Do You Pay Taxes on Crypto Before Withdrawal?

This is one of the most searched questions, and the answer is often yes. Tax is triggered when a taxable event happens, not when you move money to your bank account. If you sell Bitcoin for dollars on an exchange, you have realized a gain or loss at that moment, even if the dollars sit in your exchange account for months. The same applies if you swap one coin for another or convert to a stablecoin.

On the other hand, withdrawing itself is not taxable. Moving dollars from an exchange to your bank does not create a new tax event, and neither does moving crypto from an exchange to your own wallet. What matters is the sale or swap that happened before.

A simple example

Imagine you bought $3,000 worth of a cryptocurrency in January 2025. In March 2026 you sold it for $8,000 but left the cash on the exchange until 2027.

• The taxable event happened in March 2026, when you sold.
• Your gain is $8,000 minus $3,000, or $5,000.
• You held it for more than a year, so it is a long-term gain.
• You report it on your 2026 tax return, filed in 2027, even though you had not withdrawn the cash by the end of 2026.

Short-Term vs Long-Term Capital Gains

How long you hold crypto before disposing of it has a large effect on your tax rate. The holding period starts the day after you acquire the asset.

• Short-term gains apply to crypto held for one year or less. They are taxed at your ordinary income rates, from 10% to 37% at the federal level.
• Long-term gains apply to crypto held for more than one year. They are taxed at 0%, 15% or 20%, depending on your taxable income.

Long-term capital gains rates for 2026

These brackets apply to tax returns for 2026, filed in 2027, according to IRS Revenue Procedure 2025-32.

Rate	Single filers	Married filing jointly
0%	Up to $49,450	Up to $98,900
15%	$49,451 to $545,500	$98,901 to $613,700
20%	Over $545,500	Over $613,700

Long-term capital gains rates for 2025

For tax returns covering 2025, the thresholds were slightly lower under Revenue Procedure 2024-40.

Rate	Single filers	Married filing jointly
0%	Up to $48,350	Up to $96,700
15%	$48,351 to $533,400	$96,701 to $600,050
20%	Over $533,400	Over $600,050

Extra taxes that can apply

Two additional rules matter for some taxpayers:

• Net investment income tax. An extra 3.8% can apply when modified adjusted gross income exceeds $200,000 for single filers, $250,000 for married couples filing jointly or $125,000 for married filing separately. These thresholds are not adjusted for inflation.
• Collectibles rate. Long-term gains on assets treated as collectibles, which can include some NFTs, may be taxed at up to 28% under IRS Notice 2023-27.

State income taxes may also apply, depending on where you live. Some states, such as Florida and Texas, have no personal income tax, while others tax capital gains as ordinary income.

How Crypto Income Is Taxed

Not every crypto tax event is a capital gain. Income from crypto is taxed at ordinary income rates when you receive it.

Wages and freelance payments

If an employer pays you in crypto, it counts as wages and should appear on your W-2. If you are a freelancer or contractor, crypto payments are self-employment income, reported on Schedule C, and may be subject to self-employment tax on Schedule SE.

Mining and staking

Rewards from mining and staking are taxed as ordinary income based on their fair market value when you gain control of them. If you mine as a business, you may deduct expenses such as electricity and equipment depreciation, but you may also owe self-employment tax. When you later sell those rewards, you have a separate capital gain or loss based on the change in value since you received them.

Airdrops and forks

Airdrops are generally taxable as income once you can control the tokens. Hard forks are less clear. Under IRS Revenue Ruling 2019-24, a hard fork does not create taxable income if you never receive new coins you can control. Keep records and seek advice if you receive tokens from a fork.

Form 1099-DA and Broker Reporting

A major change began with the 2025 tax year. Crypto brokers, including centralized exchanges, must now report customer transactions to the IRS on a new form called Form 1099-DA.

• For 2025 transactions, brokers report gross proceeds, which means what you sold for, but not necessarily your cost basis. Brokers generally had to send 2025 statements to customers by February 17, 2026.
• For 2026 transactions, brokers must also report cost basis for assets generally bought on or after January 1, 2026, in the same account.

Why the details matter

If you moved crypto into an exchange from another platform or wallet, the receiving broker may not know what you paid. Your 1099-DA could show proceeds with no basis, which would look like a 100% gain if you do not correct it. You are responsible for reporting the correct basis on your return.

Also remember that not receiving a Form 1099-DA does not mean you owe nothing. Transactions on decentralized exchanges, peer-to-peer trades and some foreign platforms may not generate a form at all, but they still have to be reported.

How to Report Crypto on Your Tax Return

Reporting involves a few forms, and tax software can generate most of them if you import your transaction history.

Form	What it is used for
Form 1040 digital asset question	Every filer must answer yes or no about digital asset activity
Form 8949	Lists each sale or disposal with dates, proceeds, basis and gain or loss
Schedule D	Summarizes totals from Form 8949
Schedule 1	Reports non-business crypto income, such as staking or airdrops
Schedule C and Schedule SE	Reports business crypto income and self-employment tax
Form 709	Gift tax return for gifts above the annual exclusion
Form 8283	Supports deductions for donated crypto above certain values

The digital asset question

The first page of Form 1040 asks whether you received, sold, exchanged or otherwise disposed of a digital asset during the year. Under the IRS instructions, simply buying crypto with dollars and holding it generally does not require a yes answer, but selling, swapping, spending or receiving crypto as income usually does. Answer truthfully, since the question is signed under penalty of perjury.

Deadlines

For the 2026 tax year, returns are due April 15, 2027. You can request an extension to October 15, 2027, with Form 4868, but any tax owed is still due by April 15. Late filing can lead to a failure-to-file penalty, which is usually 5% of the unpaid tax for each month or part of a month, up to 25%.

Crypto Losses and How They Help

Losses can be valuable. If you sell or swap crypto for less than you paid, you have a capital loss.

• Losses first offset capital gains of the same type, then other gains.
• If losses exceed gains, you can deduct up to $3,000 per year against ordinary income, or $1,500 if married filing separately.
• Unused losses carry forward to future years with no time limit.

Tax-loss harvesting and the wash sale rule

Tax-loss harvesting means selling assets at a loss to offset gains. For stocks, the wash sale rule blocks the loss if you buy the same security within 30 days. Under current law, the rule generally does not apply to crypto that is not a security under current law, and its application to spot crypto ETFs is unsettled. Congress has considered closing this gap, so check the current rules before relying on it, and remember that the IRS can challenge transactions that have no real economic purpose.

Special Situations

Some crypto activity does not fit neatly into the basic buy, sell and hold pattern. These situations deserve extra care.

DeFi lending, liquidity pools and wrapping

Decentralized finance creates many transactions that may or may not be taxable. Depositing tokens into a liquidity pool usually gives you a new pool token in return, which some tax professionals treat as a swap and others do not. Interest earned on lending platforms is generally treated as income. Wrapping a coin, such as converting ETH to wrapped ETH, is another gray area. The IRS has not issued detailed guidance on many of these actions, so choose a reasonable, consistent method, document your reasoning and consider professional advice if the amounts are large.

NFTs

Buying an NFT with crypto is a disposal of the crypto you spent (and, as our guide to blockchain in intellectual property explains, it usually does not give you the copyright), so you may owe tax on that crypto’s gain. Selling an NFT creates a capital gain or loss. As noted above, some NFTs may be treated as collectibles, which can mean a higher long-term rate of up to 28%. Creators who sell NFTs they made generally have ordinary income, and royalties from resales are also income.

Lost, stolen or scammed crypto

Losing access to crypto or falling victim to a scam, including fake recovery services, is painful, and the tax treatment is limited. Personal theft and casualty loss deductions have been heavily restricted in recent years, though losses from transactions entered into for profit may be treated differently. The rules depend on the facts, such as whether you were investing or simply lost a private key. Keep police reports, platform messages and transaction records, and speak with a tax professional before claiming any deduction.

Foreign exchanges

Using an exchange based outside the US does not change your tax obligations. US citizens and residents are taxed on worldwide income, so gains on foreign platforms must be reported. Foreign account reporting rules, such as FBAR and Form 8938, may also apply depending on what the account holds and its value, so check current FinCEN and IRS guidance if you keep significant assets abroad.

Legal Ways to Reduce What You Owe

There is no way to avoid tax on real gains, but several strategies can lower your bill legally.

1. Hold for more than a year. Long-term rates are much lower than short-term rates for most people.
2. Harvest losses. Realize losses to offset gains, especially in years with large profits.
3. Choose your cost basis method. Specific identification can let you sell the lots with the highest basis first, if your records support it.
4. Use retirement accounts. A crypto IRA or crypto ETFs held in an IRA can defer or avoid tax on gains, within contribution limits.
5. Give strategically. Donating appreciated crypto held over a year to a qualified charity can avoid capital gains and may provide a deduction.
6. Time sales around income. If your income will be lower next year, delaying sales could push gains into the 0% or 15% bracket.

Record-Keeping Tips

Good records make tax time faster and protect you in an audit. For every transaction, keep:

• The date and time.
• The type of transaction, such as buy, sell, swap, transfer or income.
• The amount of crypto involved.
• The US dollar value at the time.
• Fees paid.
• Wallet addresses or exchange accounts involved.

Download transaction histories from each exchange at least once a year, since platforms can close or limit access to old data. Crypto tax software can combine data from many sources and calculate gains automatically, but always check the results for missing cost basis or duplicate transfers.

Common Mistakes to Avoid

These errors appear again and again on crypto tax returns.

• Ignoring swaps. Crypto to crypto trades are taxable even with no cash involved.
• Forgetting small transactions. Spending crypto on a purchase is still a disposal.
• Double counting transfers. Moving coins between your own wallets is not a sale.
• Missing basis on 1099-DA. Fix missing basis rather than paying tax on the full proceeds.
• Skipping income. Staking rewards, airdrops and crypto payments count as income.
• Answering no to the digital asset question when you had taxable activity.

Frequently Asked Questions

These answers cover common questions US taxpayers ask about crypto.

Final Thoughts

Taxes on crypto in the US come down to a few core rules. Crypto is property, so selling, swapping and spending it create capital gains or losses, while earning it through work, mining or staking creates ordinary income. Moving money to your bank is not what triggers tax; the sale or swap that came before is. Holding for more than a year can cut your rate sharply, with 2026 long-term rates of 0%, 15% or 20% depending on income.

With Form 1099-DA now in place, the IRS sees more crypto activity than ever. Keep detailed records, check your forms for missing cost basis, use losses wisely and speak with a qualified tax professional if your situation is complex. A little preparation now can save a lot of money and stress when the April 15 deadline arrives.

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