If you've bought, sold, swapped or earned crypto, you probably have tax reporting to do. Here's how it works in plain English.
Crypto is property, not currency
The IRS treats digital assets as property. That means the same basic rules as stocks: when you dispose of crypto, you have a capital gain or loss equal to what you received minus your cost basis (what you paid, plus fees).
- Held one year or less: short-term gain, taxed at ordinary income rates
- Held more than one year: long-term gain, taxed at 0%, 15% or 20% depending on income
What counts as a taxable event
Usually taxable:
- Selling crypto for dollars
- Swapping one coin or token for another
- Spending crypto on goods or services
- Receiving crypto as payment for work (taxed as income)
- Staking and mining rewards (generally income when you receive them)
Usually not taxable:
- Buying crypto with dollars and holding it
- Moving crypto between wallets you own
- Gifting crypto (though large gifts may require a gift tax return)
Form 1099-DA changes the game
Brokers, including major exchanges, now report digital asset sales to the IRS on Form 1099-DA. Gross proceeds reporting started with 2025 transactions, and cost basis reporting phases in for assets acquired starting in 2026. The IRS will see your sales, so your return needs to match, and missing basis on the form doesn't mean your basis is zero. You'll need your own records to prove it.
Keep records like an auditor
For every transaction, track the date, asset, quantity, value in USD, fees and the wallet or exchange. Crypto tax software can pull from exchanges and wallets, but DeFi, bridges and NFTs often need manual review.
Strategies worth knowing
- Harvest losses to offset gains elsewhere in your portfolio.
- Hold for long-term rates when it makes sense.
- Donate appreciated crypto directly to charity or a donor-advised fund to avoid capital gains.
- Plan custody for heirs so your assets don't vanish with a lost seed phrase.
Crypto tax rules continue to evolve. If your activity goes beyond simple buys and sells, get matched with a crypto-savvy CPA.