In the United States, the IRS treats crypto as property, not currency. Selling, swapping or spending it usually creates a capital gain or loss, and income such as staking or mining rewards is taxed when you gain control of it. Buying with dollars and moving coins between your own wallets generally are not taxable. This is general information and not tax advice, so ask a qualified tax professional about your situation.
Why does the IRS treat crypto as property?
The IRS decided in Notice 2014-21 that virtual currency is property, and general property tax rules still apply today. Its current digital assets page covers bitcoin, stablecoins and NFTs.
That one decision drives everything else. Each disposal is treated like selling a share or a piece of land, so buying coffee with bitcoin can create a gain or loss. It also means you need a cost basis for each unit: what you paid for it, including fees, in US dollars.
What is taxable, and what is not?
The clearest way to think about this is whether you received value or disposed of an asset. The IRS's lists look like this:
| Usually taxable | Usually not taxable by itself |
|---|---|
| Selling crypto for dollars | Buying crypto with dollars |
| Swapping one crypto for another | Holding crypto |
| Spending crypto on goods or services | Moving crypto between wallets you control |
| Paying a transfer fee with crypto | Receiving a gift (no income until you dispose of it) |
| Receiving crypto as pay, a reward or an award | Donating to a qualifying charity (no gain or loss recognized) |
| Receiving mining or staking rewards, or new coins from a hard fork |
Two points catch people out. A swap on a decentralized exchange is still a taxable exchange, even if no dollars change hands. And moving coins between your own wallets is not taxable, but paying the network fee in crypto is itself a small disposal.
How are capital gains taxed?
Your gain or loss is the value you received minus your cost basis, and the rate depends on how long you held the asset. Under IRS Topic 409, one year or less is short-term and is taxed at ordinary income rates. More than one year is long-term and gets lower rates.
Rev. Proc. 2025-32 sets these 2026 limits for long-term gains, based on total taxable income:
| Long-term rate | Single | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | Up to $545,500 | Up to $613,700 |
| 20% | Above $545,500 | Above $613,700 |
Higher earners may also owe the net investment income tax, and many states add their own tax.
How do cost basis methods work?
The method decides which coins you sold, which can change your bill substantially. Since January 1, 2025, the regulations apply wallet by wallet or account by account, and not across everything you own. Rev. Proc. 2024-28 gave a safe harbor for moving to that system.
- FIFO (first in, first out) is the default. If you do not identify units, the earliest acquired units in that wallet or account are treated as sold first.
- Specific identification lets you choose the units, including highest-cost-first. You must identify them no later than the time of sale. For coins at a broker, that generally means telling the broker. Notice 2025-7 offered temporary relief only for 2025.
The rules are built around those two methods. They mention average basis only where it is otherwise permitted, so do not assume a software averaging setting is valid for your coins without checking.
A worked example
Here is a simplified 2026 example with invented prices. Maya is a single filer with taxable income in the 22% bracket ($50,400 to $105,700), all of it in one exchange account.
- March 2025: She buys 1 ETH for $2,000 plus a $20 fee. Basis: $2,020.
- June 2026: She buys 1 ETH for $3,000 plus a $30 fee. Basis: $3,030.
- During 2026: She earns 0.04 ETH in staking rewards, worth $128 when she gains control of them. That is $128 of ordinary income, and about $28 of tax at 22%. Her basis in that ETH is $128.
- October 2026: She swaps 1 ETH for SOL worth $3,500, with no fees. Which ETH did she dispose of?
| Method | Unit sold | Gain | Holding period | Rate | Approximate tax |
|---|---|---|---|---|---|
| FIFO | March 2025 lot | $3,500 - $2,020 = $1,480 | Over one year | 15% | $222 |
| Specific ID | June 2026 lot | $3,500 - $3,030 = $470 | One year or less | 22% | $103 |
Specific identification lowers this year's tax by about $119. It is not free money. The lower-basis coin stays in her account, so a future sale would produce a larger gain. In other cases, a long-term lot at 15% beats a short-term lot at 22%, so run both.
Her swap also creates a new position. Her SOL has a basis of $3,500, and its holding period starts the day after the swap. Even if she never converts to dollars, she owes tax on the swap for 2026.
How are staking, mining and airdrops taxed?
These are generally ordinary income at fair market value when you gain control, and any later sale is a separate event.
- Staking. Rev. Rul. 2023-14 says a cash-method taxpayer includes rewards in income in the year they gain dominion and control, meaning the ability to sell, exchange or otherwise dispose of them. In June 2026, the Tax Court reached the same practical result in Paschall v. Commissioner, T.C. Memo. 2026-46, relying on section 61 and not on the ruling. It is a memorandum opinion in a case without counsel, and specific lockups or arrangements can raise other questions.
- Mining. Notice 2014-21 says mined coins are income at their value on receipt. If mining is a trade or business, the net earnings are also subject to self-employment tax.
- Airdrops. Rev. Rul. 2019-24 says an airdrop of new coins after a hard fork is ordinary income once you receive the units. A hard fork with no new coins for you creates no income. That ruling addresses airdrops following forks. Other token drops are not covered by its specific facts, so ask a professional how general income rules apply.
Income from forks, staking or mining generally goes on Schedule 1, and independent contractor pay goes on Schedule C.
How do gifts and losses work?
Gifts and losses follow rules that surprise many first-time filers.
Gifts. IRS FAQ 31 to 33 say a recipient has no income until they dispose of the coins. For a gain, their basis is the donor's basis plus any gift tax paid. For a loss, it is the lower of the donor's basis or the value at receipt. Without documentation of the donor's basis, it is zero, so ask for those records. The IRS frames these FAQs around transactions before 2025, and we found no later change on these points. Givers may need to file Form 709. In 2026, the first $19,000 of gifts per recipient is generally excluded.
Losses. Capital losses offset capital gains. Beyond that, you can deduct up to $3,000 a year ($1,500 if married filing separately) against other income and carry the rest forward.
Does the wash sale rule apply to crypto?
Not under its current text, because the rule covers stock and securities and the IRS treats crypto as property, though a change has been proposed. Section 1091 disallows a loss when you buy substantially identical "stock or securities" within 30 days before or after a sale. It does not mention digital assets. Three cautions apply:
- Tokenized securities are different. Form 1099-DA instructions say wash sale losses on tokenized securities must be reported.
- Sham trades can be challenged. The economic substance doctrine requires a transaction to change your economic position in a meaningful way, and to have a substantial purpose apart from tax. A sale and immediate rebuy could draw scrutiny, so get advice first.
- The law may change. The PARITY Act (H.R. 8899), introduced in 2026, would extend wash sale rules to digital assets. It is a proposal and has not been enacted.
What are Form 1099-DA and Form 8949?
Form 1099-DA is what brokers send you and the IRS, and Form 8949 is where you report each disposal. The rollout has been gradual, and the digital assets page explains the stages:
| Sales in | What custodial brokers report |
|---|---|
| 2025 | Gross proceeds only. You must work out your own basis. |
| 2026 | Gross proceeds, plus basis for covered assets: those acquired after 2025 in a custodial account. |
A blank basis box does not mean zero basis. Older coins remain noncovered, and you still report your true basis. Other limits are worth knowing:
- Decentralized platforms that never take possession of your assets are not covered as brokers.
- Staking rewards are not reported on Form 1099-DA. You still report them.
- Notice 2024-57 pauses broker reporting on staking, lending, wrapping and liquidity provider transactions. It says this implies nothing about how they are taxed. The absence of a form does not mean the absence of tax.
- Brokers may use optional methods that leave out small sales of qualifying stablecoins (up to $10,000 a year) and specified NFTs (up to $600 a year).
Your return has its own requirements. Form 8949 uses boxes G, H and I for short-term and J, K and L for long-term digital assets, depending on whether a 1099-DA reported your basis. Totals flow to Schedule D. Form 1040 asks a digital asset question that you must answer whether or not you received a 1099-DA.
What records should you keep?
The IRS expects records of purchases, sales, other disposals and the dollar value of crypto you receive as income. A short checklist:
- Date and time of each acquisition and disposal.
- Units, dollar value and fees.
- Which wallet or account held the units, and which lot you identified.
- Transfers between your own wallets, so they are not mistaken for sales.
Export exchange history regularly, because accounts can close. For rules on regulated tokens, see what the GENIUS Act means for stablecoins. More on this topic is in our regulation hub.
Key takeaways
- The IRS treats crypto as property, so selling, swapping and spending are generally taxable disposals.
- Holding for more than one year qualifies for long-term rates of 0%, 15% or 20%. Shorter holds are taxed as ordinary income.
- FIFO is the default within each wallet or account, and specific identification must happen by the time of sale.
- Staking and mining rewards are generally income when you gain control of them, as Rev. Rul. 2023-14 and Paschall reflect.
- The wash sale rule covers stock and securities, not crypto as property today, but proposals could change that.
- Form 1099-DA now covers many sales, but it does not replace your own records. Ask a qualified tax professional before filing.
Sources
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