Nobody gets into crypto for the paperwork, but the paperwork is not optional. In the US — and this guide is US-focused; other countries differ and are covered only in spirit — the IRS treats cryptocurrency as property, not currency. That one classification creates the entire regime: gains are taxed like stock gains, income is taxed like wages, and almost everything you do with crypto leaves a taxable fingerprint. As of mid-2026 there’s a second reality: brokers now report your activity to the IRS on Form 1099-DA. This guide maps what’s taxable, what isn’t, and how to keep records that won’t collapse under scrutiny. It’s a map, not advice — for your actual return, talk to a CPA who knows crypto.
Taxable events vs non-taxable events
The bright lines, under the rules as of mid-2026:
| Action | Taxable? | How it’s taxed |
|---|---|---|
| Buying crypto with dollars | No | — (but record your cost basis from day one) |
| Holding, whatever the price does | No | — (unrealized gains aren’t taxed) |
| Moving coins between your own wallets | No | — (keep records proving both wallets are yours) |
| Selling crypto for fiat | Yes | Capital gain or loss |
| Trading crypto for crypto (BTC→ETH, or into a stablecoin) | Yes | Capital gain or loss on the coin you disposed of |
| Spending crypto on goods or services | Yes | Capital gain or loss — yes, even on a coffee |
| Earning crypto (staking, mining, airdrops, interest) | Yes | Ordinary income at fair market value when received |
The surprise for most people is the middle rows: swapping BTC for ETH, or cashing into USDC, is a disposal of BTC with a reportable gain or loss. “I never touched dollars” is not a defense — every trade on every exchange is its own taxable event, which is why active traders generate hundreds of line items a year.
Short-term vs long-term: the one-year cliff
Hold an asset more than one year before selling and profits qualify for long-term capital gains rates: federally, 0%, 15% or 20% depending on your taxable income. Sell at one year minus a day and the same profit is short-term — taxed as ordinary income at your marginal rate, which for many people is considerably higher. The one-year threshold is the single most valuable date in crypto tax planning, and it’s mechanical: if you’re going to sell anyway, check the calendar first. State taxes stack on top in most states.
Income events: staking, mining, airdrops
Crypto you earn is ordinary income, valued at fair market price on the day you gain control of it — staking rewards dripping in daily, mining payouts, airdropped tokens with market value (see our airdrop guide for the mechanics). Then a second event waits in the future: when you later sell or swap those coins, you owe capital gains on any change since you received them, with that income value as your cost basis. Two tax events, one pile of coins. The practical burden is record-keeping — hundreds of micro-income events per year per staking position — which is exactly what tax software exists for (below).
The 1099-DA era: the IRS sees more than you think
Starting with the 2025 tax year (forms arriving in early 2026), centralized exchanges and other “brokers” must report your gross proceeds to the IRS on Form 1099-DA; from the 2026 tax year they also report cost basis for assets bought and sold on the same platform. Two important caveats. First, basis reporting breaks the moment coins move between platforms — the receiving exchange doesn’t know what you originally paid, so your own records remain the backbone. Second, the parallel reporting rules for DeFi brokers were repealed by Congress in April 2025 — but repeal of reporting is not repeal of tax. On-chain gains remain fully taxable; you’re simply back to self-reporting them. Assume the IRS’s matching systems get better every year, because they do.
Cost basis and per-wallet FIFO
Your gain is proceeds minus basis — what you paid, including fees. When you bought the same coin at many different prices, which coins did you just sell? The current US rule is per-wallet (per-account) FIFO: by default the oldest units in each wallet or account are treated as sold first, and you can’t average across wallets or cherry-pick lots held elsewhere. Specific identification is possible in some cases, but it demands rigorous, contemporaneous records. FIFO after a long bull run means selling your cheapest, oldest coins first — maximizing taxable gains — which is one more reason the one-year horizon matters.
Losses: the silver lining, and the wash-sale quirk
Capital losses offset capital gains without limit, and up to $3,000 of net excess loss can offset ordinary income per year, with the remainder carried forward. In a drawdown like mid-2026 — Bitcoin around $63,100 versus its $126,080 October 2025 peak — deliberate loss-harvesting is one of the few gifts a bear market gives. The quirk: the wash sale rule, which bars claiming a loss if you rebuy within 30 days, currently applies to securities — and crypto, taxed as property, has historically sat outside it. As of mid-2026 that asymmetry still stands, but it has been targeted by repeated legislative proposals and could change; verify the current rule before relying on a same-day sell-and-rebuy. That hedge is deliberate — this is exactly the kind of detail that moves.
How to actually track everything
- Export CSVs from every exchange you’ve ever used, at least annually — platforms shut down, delist history, and close accounts.
- Use dedicated crypto tax software (several reputable tools exist; compare current reviews) to import APIs and CSVs, reconcile transfers between your own wallets so they aren’t misread as sales, and generate Form 8949 data.
- Reconcile against your 1099-DA and flag mismatches early — the IRS gets the same form you do.
- Keep the boring evidence: purchase confirmations, the wallet addresses you control, and notes on anything unusual. Your future self — or your CPA — will need them.
When to call a professional
DIY works for buy-hold-sell on one or two exchanges. Get a CPA or tax attorney with genuine crypto experience the moment any of these apply: meaningful DeFi activity (liquidity positions, lending, bridging), NFTs, margin or futures, foreign accounts, mining as a business, five-figure-plus gains, or a letter from the IRS. Professional fees hurt less than penalties, and tax positions taken on internet advice — including this article — are yours alone. Rules vary by country and change by year; the IRS’s own virtual currency FAQ is the ground truth for US federal treatment. For a one-paragraph refresher on the core terms, see our crypto taxes glossary entry.
Where to go next
Selling soon? Read how to cash out first. Earning yield? Staking explained covers the income side, and the trading guide explains the swaps that generate all those line items.
This guide is educational only and is not tax, legal or financial advice. Tax rules differ by jurisdiction and change frequently — consult a qualified professional about your situation. Read our full disclaimer.