How to Calculate and Report Crypto Taxes to the IRS

How Cryptocurrency Is Taxed in the United States

The IRS treats cryptocurrency as property, not currency. Selling, trading, or spending crypto held as a capital asset can create a capital gain or loss. Whether you hold Bitcoin or trade through DeFi, keeping complete records helps you report the correct amounts. The IRS digital asset overview explains the reporting rules.

Our Crypto Tax Calculator provides an illustrative single-sale planning estimate using its stated assumptions, not a filing calculation. It does not select or track individual lots using FIFO or LIFO, or net the sale against your other capital gains and losses. Verify the applicable tax year, basis, holding period, and tax treatment before using an estimate on a return.

What Crypto Events Are Taxable?

Not every crypto transaction creates income or a capital gain. Here are common examples:

The key rule: a disposition can require reporting even if it produces no gain or a loss. A gift is not the same as selling crypto first and giving away the cash. An ordinary transfer between your own wallets is not automatically a taxable exchange.

Short-Term vs. Long-Term Capital Gains

How long you held crypto as a capital asset before disposing of it determines whether a gain is short-term or long-term:

Short-term gains (held 1 year or less) are generally taxed at ordinary federal income tax rates, ranging from 10% to 37% for 2026.

Long-term gains (held more than 1 year) generally receive preferential federal rates. These are the 2026 taxable-income thresholds, not thresholds for returns covering 2025 that are filed in 2026:

Source: IRS Revenue Procedure 2025-32, section 4.03. The gain is included in taxable income, and portions can fall into different bands; the table does not mean the whole gain always gets one rate. State taxes and the net investment income tax can add to the federal amounts.

For example, selling Bitcoin for $50,000 after 11 months creates a short-term gain or loss based on the amount received and your basis, not a $50,000 taxable gain automatically. Holding it for more than 1 year can change the gain's classification, but it does not guarantee a 15% rate or a particular saving. Use our Crypto Tax Calculator only for an illustrative comparison, with the limitations above in mind.

How to Calculate Your Crypto Capital Gains

For a straightforward cash sale, the starting formula is:

Capital Gain (or Loss) = Sale Proceeds - Adjusted Cost Basis - Allocable Selling Fees

Your cost basis generally starts with what you paid, including allocable acquisition costs. Avoid deducting the same fee twice. Exchanges of one digital asset for another have particular transaction-cost allocation rules.

For transactions on or after January 1, 2025, the IRS digital asset FAQs explain identification within each wallet or account:

• FIFO (First In, First Out): If you do not adequately identify the disposed units, the default generally uses the earliest acquired units in that wallet or account. In a rising market, those units may have a lower basis and a larger gain.
• Specific identification: You may identify particular units if you meet the timing and recordkeeping requirements. Selecting the most recently purchased units is sometimes called LIFO (Last In, First Out), but that label alone does not satisfy the IRS requirements. For custodial broker transactions after December 31, 2025, communicate an adequate identification to the broker no later than the transaction date and time and keep supporting records. A broker's available identification methods can limit your choices.

Worked Example

You bought 1 BTC at $30,000 in January 2025 and another 1 BTC at $60,000 in October 2025. In March 2026, you sell 1 BTC for $75,000. Assume both lots are in the same wallet or account, no fees, and that choosing the newer lot meets the applicable identification requirements.

FIFO produces a larger gain that qualifies as long-term in this example. Choosing the newer lot produces a smaller short-term gain. Exact dates determine the holding period, and the tax outcome depends on total taxable income and any additional taxes. Use the Crypto Profit/Loss Calculator to compare the trading gain amounts; it does not replace compliant lot identification or a tax return.

Crypto Income: Mining, Staking, and Airdrops

Some crypto events create ordinary income, rather than only capital gains:

• Mining rewards: Generally income at fair market value when received; business activity can also have self-employment consequences.
• Staking rewards: Income when you gain dominion and control. See our Staking Rewards Calculator for projections, not a determination of taxability.
• Airdrops: An airdrop associated with a hard fork can create income when you gain dominion and control of the new assets. Receipt and control, not merely the announcement of a fork, matter.
• Payment for services: Wages or income from self-employment, depending on the work arrangement.

The amount recognized as income generally becomes your basis. A later sale can create a separate gain or loss measured against that basis; the same receipt value is not taxed a second time as a capital gain.

Which IRS Forms Do You Need?

For the 2025 tax year (filed in 2026), the forms depend on your transactions:

• Form 8949: Report sales or exchanges of digital assets held as capital assets, including acquisition and sale dates, proceeds, basis, and gain or loss, subject to the form's instructions and applicable exceptions.
• Schedule D (Form 1040): Summarize capital gains and losses.
• Schedule 1 or Schedule C: Report ordinary crypto income on the appropriate form; business and nonbusiness activities are treated differently. Crypto paid as employee wages is reported as wages.
• Form 1099-DA: Covered custodial brokers report gross proceeds from applicable transactions starting January 1, 2025. Basis reporting for certain transactions begins January 1, 2026. The form is a broker statement, not a substitute for your own return or records, and its absence does not remove your reporting obligations.

Exchanges, brokers, and DeFi platforms can produce reportable transactions even when no statement arrives. Keep transaction-level records, including fees, transfers, basis, and holding periods. A Crypto Portfolio Calculator can help organize portfolio values, but it is not a complete transaction ledger.

Tax-Loss Harvesting: Turn Losses into Savings

Realized investment losses can offset capital gains, subject to the applicable rules. The wash-sale rules described in IRS Publication 550 concern stock or securities and substantially identical replacements within 30 days before or after a sale. Do not assume every crypto-related asset or instrument falls outside those rules, or that an immediate repurchase always produces a deductible loss.

To evaluate harvesting:

1. Identify an investment position with an unrealized loss and assess whether selling fits your investment plan.
2. If you sell, document proceeds, basis, fees, and any replacement transactions.
3. Apply the relevant loss rules and capital gain/loss netting requirements before claiming a deduction.

You can generally deduct up to $3,000 in net capital losses against ordinary income per year ($1,500 if married filing separately), with unused losses carried forward. If you had $20,000 in gains and $25,000 in losses, the net loss is $5,000. Assuming the $3,000 limit applies and the losses are deductible, deduct $3,000 this year and carry $2,000 forward. See IRS Topic 409 for the limits and carryover rules.

Reviewing your portfolio before year-end can help you identify losses and organize records. Price movements and transaction costs still matter; a tax benefit is not guaranteed.

Common Crypto Tax Mistakes

Not reporting small transactions. Even spending $5 of Bitcoin on coffee can create a reportable disposition. Your reporting duty does not depend on receiving an exchange statement.

Forgetting crypto-to-crypto swaps. Trading ETH for SOL on a DEX can create a gain or loss even if you never receive dollars. Review cross-chain transactions to distinguish an actual exchange from a transfer of your own assets.

Using the wrong cost basis. Without adequate specific identification, FIFO generally applies within the wallet or account. Keep purchase and transfer records instead of assuming you can select any lot across all exchanges after a sale.

Ignoring staking and airdrop income. Where income recognition applies, dominion and control can trigger it before a sale. Missing that income and its corresponding basis can distort the return.

Frequently Asked Questions

Do I have to pay taxes on crypto if I didn't cash out?

Simply holding cryptocurrency does not by itself create income or a capital gain. Selling, exchanging, spending, or otherwise disposing of it can create reportable gain or loss without a conversion to dollars. Mining, staking, or a qualifying airdrop can also create income when the applicable receipt and control conditions are met.

What is the crypto capital gains tax rate in the U.S.?

It depends on the holding period and taxable income. Short-term gains (held 1 year or less) generally use ordinary federal income rates of 10%-37%. Long-term gains (held more than 1 year) generally use 0%, 15%, or 20%. Use the correct tax year's thresholds; additional state or net investment income taxes may apply.

What IRS forms do I need for crypto taxes?

Form 8949 and Schedule D generally report sales or exchanges of capital assets. Schedule 1 or Schedule C may apply to ordinary crypto income, while employee wages are reported as wages. Covered custodial brokers begin gross-proceeds reporting on Form 1099-DA for applicable 2025 transactions, with basis reporting for certain 2026 transactions. Keep your own records whether or not a broker form arrives.

Can I deduct crypto losses on my taxes?

Deductible investment losses can offset capital gains. If capital losses exceed capital gains, the annual deduction against ordinary income is generally limited to $3,000 ($1,500 if married filing separately). Unused losses can carry forward. A price decline without a disposition does not automatically create a deductible capital loss.

Is swapping one crypto for another a taxable event?

Exchanging a capital asset for a materially different digital asset generally recognizes gain or loss on the disposed asset. Calculate proceeds and adjusted basis under the applicable rules. A DEX swap or buying an NFT with crypto can involve such a disposition. Moving the same asset between your own wallets is different; do not treat every bridge transaction as automatically taxable, and account separately for crypto spent on transaction fees.

Take Control of Your Crypto Tax Strategy

Start by tracking every transaction, establishing the basis and holding period of the actual units disposed of, and checking the applicable year's rules. Assess any loss-harvesting plan before acting. Organized records make filing easier.

Use the Crypto Tax Calculator for an illustrative estimate with its stated limitations, and explore more crypto and digital asset calculators for planning. For more on trading gains, see our Crypto Profit/Loss Guide and DCA Crypto Investing Guide.