Disclaimer: This guide is for informational purposes only and is not tax or legal advice. US tax law is complex and changes frequently. Consult a qualified CPA or tax attorney for advice specific to your situation.
⚡ US Crypto Tax in 3 Sentences
The IRS classifies crypto as property, not currency (Notice 2014-21). Every time you sell, trade, or spend crypto, you trigger a capital gains event. Gains held over 12 months are taxed at preferential long-term rates (0%, 15%, or 20%); gains held under 12 months are taxed as ordinary income (up to 37%).
IRS Classification: Crypto as Property
In 2014, the IRS issued Notice 2014-21 establishing that virtual currency is treated as property for US federal tax purposes. This single ruling defines how crypto is taxed: the same rules that apply to stocks, bonds, and real estate apply to Bitcoin, Ethereum, and every other cryptocurrency.
The practical implication: every disposal of crypto creates a taxable event. Whether you sell, swap, spend, or give away crypto, you must calculate and report the resulting gain or loss to the IRS.
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The most important question: What did you pay for it, and what did you receive when you disposed of it? The difference is your taxable gain or deductible loss.
2026 Capital Gains Tax Rates
Short-Term (held ≤ 12 months)
Ordinary Income Rate
Taxed at your regular income tax bracket — 10%, 12%, 22%, 24%, 32%, 35%, or up to 37%. The least tax-efficient outcome. Avoid when possible by holding longer than 12 months.
Long-Term (held > 12 months)
0%, 15%, or 20%
Significantly lower rates. Most middle-income investors pay 15%. High earners ($553,850+ single, $623,300+ married) pay 20%. Some lower-income filers pay 0%.
| 2026 Filing Status | 0% LTCG Rate | 15% LTCG Rate | 20% LTCG Rate |
|---|
| Single | Up to $47,025 | $47,025–$518,900 | Over $518,900 |
| Married Filing Jointly | Up to $94,050 | $94,050–$583,750 | Over $583,750 |
| Head of Household | Up to $63,000 | $63,000–$551,350 | Over $551,350 |
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Net Investment Income Tax (NIIT): High-income investors may also owe an additional 3.8% NIIT on crypto gains. This applies to single filers with income over $200,000 or married filers over $250,000. Factor this into your planning.
What Triggers a Taxable Event
| Event | Taxable? | Tax Type | How to Calculate |
|---|
| Sell crypto for USD | Yes | Capital Gains | Sale proceeds minus cost basis |
| Swap BTC for ETH | Yes | Capital Gains | Fair market value of ETH received minus BTC cost basis |
| Buy goods/services with crypto | Yes | Capital Gains | FMV at time of purchase minus cost basis |
| Staking rewards | Yes | Ordinary Income | FMV at time of receipt |
| Mining income | Yes | Ordinary Income (+ SE tax if business) | FMV at time of receipt |
| Airdrop received | Yes | Ordinary Income | FMV at time of receipt (if you have dominion/control) |
| Buy crypto with USD | No | — | Sets your cost basis |
| Transfer between own wallets | No | — | Keep records; cost basis carries over |
| Gift to spouse | No | — | Recipient inherits your cost basis |
| Donate to charity (501c3) | No CGT | — | May be deductible at FMV if held >12 months |
Crypto Tax Reports in Minutes
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Crypto transactions are reported on two forms as part of your annual tax return (Form 1040):
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Note the 1099-DA: Starting in 2026, US crypto exchanges are required to issue Form 1099-DA to users and the IRS, reporting gross proceeds from crypto sales. This means the IRS will have direct visibility into your exchange activity. Accurate reporting has never been more important.
Cost Basis & Accounting Methods
The IRS allows several accounting methods for determining which coins you're selling when you have multiple purchases at different prices. The choice significantly affects your tax bill.
| Method | IRS Allowed? | Best When | Tax Impact |
|---|
| FIFO (First In, First Out) | Yes (default) | Prices are falling | Higher gains in bull market |
| LIFO (Last In, First Out) | Yes (must elect) | Prices are rising | Lower short-term gains |
| HIFO (Highest In, First Out) | Yes (must elect) | Most situations | Minimises taxable gains |
| Specific Identification | Yes (with records) | You have detailed records | Maximum control; most complex |
HIFO is generally most tax-efficient — it sells your highest-cost coins first, minimising the gain on each transaction. Koinly and CoinTracker both support HIFO automatically. You must consistently apply your chosen method within a tax year.
Crypto as Income: Staking, Mining, Airdrops
When you earn crypto rather than buy it, it's treated as ordinary income — taxed at your regular income rate, not the preferential capital gains rate.
- Staking rewards: Taxed as ordinary income at the fair market value on the day you received them. The cost basis of the newly received coins becomes that FMV — used when you eventually sell them.
- Mining income: Self-employment income if conducted as a business (subject to self-employment tax). If a hobby, reported as other income. Deductible business expenses (electricity, hardware) apply to business miners.
- Airdrops: Taxable as ordinary income when you receive them and have dominion and control over the tokens. The Jarrett v. US case (2022) challenged staking tax treatment, but the IRS has maintained its position.
Using Losses to Reduce Your Tax Bill
Crypto Tax Reporting Made Simple
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Capital losses can be used to offset capital gains. If your total losses exceed gains, you can deduct up to $3,000 of net capital losses against ordinary income per year. Any remaining losses carry forward to future years indefinitely.
Wash-sale rule: Currently, the IRS wash-sale rule (which prevents repurchasing the same security within 30 days of a loss sale) does not apply to crypto. This is under ongoing legislative scrutiny — enjoy it while it lasts. It means you can sell at a loss to lock in a tax deduction, then immediately repurchase the same coin.
How to File: Step-by-Step
1
Export transaction history from all exchanges
Download CSV reports from Coinbase, Kraken, Binance, and every other exchange you've used. Include your wallet transaction history for any on-chain activity.
2
Import into crypto tax software
Connect Koinly or CoinTracker to your exchanges via API or CSV import. The software calculates your cost basis and gain/loss for every transaction automatically.
3
Review and reconcile
Check for missing cost basis data (common if you used exchanges before 2018). Correctly categorise staking rewards, airdrops, and DeFi transactions.
4
Export IRS-ready reports
Generate your Form 8949 report from the software. Most platforms produce a TurboTax-compatible file, a CSV for manual entry, or a downloadable Form 8949 PDF.
5
Include in your Form 1040
Attach Form 8949 and Schedule D to your 1040. Report staking/mining income on Schedule 1. File by April 15 (or October 15 with extension). Pay any taxes owed to avoid penalties.
Generate Your Form 8949 with Koinly →
Frequently Asked Questions
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Do I owe tax if I lost money on crypto?
No tax is owed on losses — but you must still report them. Capital losses can offset gains, and up to $3,000 per year can be deducted against ordinary income. Losses carry forward indefinitely.
What if I didn't report crypto in previous years?
File amended returns (Form 1040-X) for prior years. The IRS has a voluntary disclosure process. Proactively correcting past filings typically results in lower penalties than being audited. Consult a CPA or tax attorney.
Is there a de minimis exemption for small crypto transactions?
No — the IRS currently has no de minimis exemption for crypto. Even a $5 gain from spending crypto on coffee is technically reportable. Tax software automates the tracking so even small transactions are captured.
Does the IRS know about my crypto?
Increasingly, yes. Regulated exchanges send 1099 forms to the IRS. Starting in 2026, Form 1099-DA adds more visibility. Blockchain analytics firms work with the IRS to trace on-chain transactions. Assuming anonymity is a dangerous strategy.
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Disclaimer: This guide reflects US tax rules as understood in March 2026. Tax law changes frequently. This is not tax advice — consult a licensed CPA or tax attorney for your specific situation.
