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Cryptocurrency is taxable property in the United States. The IRS treats it like stocks, not like currency, so every time you sell crypto, trade one coin for another, spend it, or receive it as income, you have a taxable event. With crypto prices elevated in 2026 and trading volumes up, many people have gains they may not realize they owe tax on. Here is what is taxable, how to calculate it, and how to report it. Because crypto tax rules are complex and evolving, confirm your specifics with a CPA or tax professional.
Key Takeaways
- Crypto is property, so selling, trading, or spending it is a taxable event, but buying and holding are not.
- Holding over a year qualifies for lower long-term capital gains rates (0%, 15%, or 20%).
- Form 1099-DA is now in effect, so the IRS receives data on your exchange transactions.
- Crypto is not subject to the wash-sale rule as of 2026, which enables tax-loss harvesting.
FILING YOUR 2026 RETURN WITH CRYPTO?
The 2027 filing season is the first time these deductions appear on a real return. For step-by-step claim instructions, see: How to File Your 2026 Taxes (2027 Season): Complete Guide to Claiming the New OBBBA Deductions.
The Fundamental Rule: Crypto Is Property
The IRS classified cryptocurrency as property in 2014 (Notice 2014-21), and that has not changed. So:
- Buying crypto with dollars is not taxable.
- Selling crypto for dollars is taxable (a gain or loss).
- Trading Bitcoin for Ethereum is taxable (you sold Bitcoin).
- Spending crypto on a purchase is taxable (you sold property).
- Receiving crypto as payment, or from mining or staking, is taxable as ordinary income at its value when received.
Short-Term vs Long-Term Capital Gains
How long you held the crypto before selling determines the rate:
| Holding period | Tax rate |
|---|---|
| Under 1 year (short-term) | Ordinary income rates (10% to 37%) |
| Over 1 year (long-term) | 0%, 15%, or 20% based on income |
Most middle-income households pay 15% on long-term gains. For 2026, single filers with taxable income up to about $49,450, and married couples up to about $98,900, pay 0% on long-term gains, meaning long-term crypto gains can be tax-free at these income levels. These rates were left unchanged by the 2025 tax law (OBBBA), and the thresholds adjust each year, so verify the current figures.
What Counts as a Taxable Event
Taxable: selling crypto for cash; trading one crypto for another; spending crypto on goods or services; receiving crypto as payment for work; and mining, staking, airdrop, or hard-fork proceeds (all ordinary income at fair market value when received).
Not taxable: buying crypto with dollars; transferring crypto between your own wallets; simply holding (unrealized gains are not taxed); and receiving crypto as a gift (though the giver may have tax consequences).
How to Calculate Your Gain or Loss
For each taxable transaction, gain or loss equals sale price minus cost basis. Cost basis is what you paid, including fees. If you bought 1 Bitcoin for $45,000 plus $50 in fees, your basis is $45,050, and selling it for $92,000 is a $46,950 gain.
When you bought at different prices, you need an accounting method to decide which coins you sold:
- FIFO (First In, First Out): the IRS default, selling your oldest coins first.
- Specific Identification: you identify exactly which coins you sold, which lets you optimize, such as selling higher-basis coins to reduce gains.
- HIFO (Highest In, First Out): sells the highest-cost coins first to minimize gains, available under specific identification.
Specific identification requires detailed per-transaction records showing which coins you designated for each sale.
Form 1099-DA Reporting Is Now in Effect
Crypto exchanges now report your transactions to the IRS on Form 1099-DA (Digital Asset), the crypto equivalent of the 1099-B that stockbrokers issue. Brokers began reporting gross proceeds for transactions on or after January 1, 2025 (so the first forms arrived in early 2026), and cost basis reporting was added for 2026 transactions (forms in early 2027). If you use Coinbase, Kraken, Gemini, or other major exchanges, expect these forms, and remember the IRS gets a copy too. Failing to report taxable crypto is far riskier now that the IRS has this data.
Crypto Tax Software
If you made more than a handful of transactions, calculating crypto taxes by hand is painful. Tax software imports your transactions, calculates gains and losses, and generates the IRS forms. Common options include CoinTracker, Koinly, TaxBit, and TurboTax Crypto, with free tiers for small numbers of transactions and paid plans that scale up (confirm current pricing on each site). If you only made a few trades, you can do it manually from your exchange history.
Tax-Loss Harvesting for Crypto
Unlike stocks, crypto is not subject to the wash-sale rule as of 2026. That means you can sell crypto at a loss, immediately buy it back, and still claim the tax loss, whereas stocks require a 30-day wait. For example, you could sell Bitcoin at a $5,000 loss in December, claim the loss to offset other gains, and repurchase right away, resetting your cost basis lower while staying in the position. This is legal as of 2026, though the IRS has proposed applying wash-sale rules to crypto and could finalize that in the future, so watch for changes.
Crypto Received as Wages or Freelance Pay
If you are paid in crypto, its value when you receive it is ordinary income, reported like cash wages on your W-2 or on Schedule C for freelance work. Your cost basis for any future sale is that fair market value at receipt. If you freelance, see our guide to side hustle taxes for how self-employment tax and deductions work.
FAQ
Do I owe taxes if I just hold crypto?
No. Buying and holding are not taxable. You owe tax only when you sell, trade, spend, or earn crypto.
Is trading one coin for another taxable?
Yes. Trading, say, Bitcoin for Ethereum is treated as selling the Bitcoin, so any gain is taxable even though you never touched cash.
What is Form 1099-DA?
The new tax form exchanges use to report your crypto transactions to you and the IRS. Gross proceeds reporting began for 2025, with cost basis added for 2026.
Can I write off crypto losses?
Yes. Losses offset gains, and crypto is not subject to the wash-sale rule as of 2026, so you can repurchase right away and still claim the loss. Excess losses can offset a limited amount of ordinary income.
How to Claim This on Your 2026 Return
Now that you know the rules, here is how to actually claim it when you file. The step-by-step guides below cover which boxes to check on your W-2, where the deduction appears on Form 1040, and how the major tax software platforms handle it:
- How to File Your 2026 Taxes (2027 Season): Complete Guide to Claiming the New OBBBA Deductions
- Best Tax Software for 2027: Which Handles Crypto and New OBBBA Deductions
Bottom Line
Crypto is property, so selling, trading, spending, or earning it creates a taxable event, and the IRS now sees your exchange activity through Form 1099-DA. Track your cost basis, hold over a year for lower rates when you can, harvest losses while the wash-sale rule does not apply, and report everything. If you owe a lot, you may also need to make quarterly estimated payments, and if you are weighing crypto yield, see our look at stablecoin yield programs. Because the rules are complex and changing, confirm your situation with a CPA or tax professional and verify current figures at irs.gov.
This article is for educational and informational purposes only and is not tax or investment advice. Crypto tax rules are complex and evolving, and thresholds change yearly. Consult a CPA or qualified tax professional, and verify current details at irs.gov.
