For a taxable disposition of digital assets you hold as capital assets, calculate your gain or loss in U.S. dollars as amount realized − adjusted basis of the units disposed. For a cash sale, amount realized generally starts with the cash you receive; qualifying fees may change the calculation, and the IRS’s fee guidance differs for transactions completed before 2025 and those completed on or after January 1, 2025. The steps below address U.S. federal income tax for individuals, not business receipts, crypto received as income, or every complex DeFi transaction.
Which crypto transactions can create a gain or loss?
The IRS treats digital assets as property. Selling crypto for dollars is a disposition, but it is not the only one: exchanging it for another digital asset or other property, or spending it on goods or services, can also result in a capital gain or loss if you held the asset as a capital asset. The IRS states that “the general tax principles applicable to all property transactions also apply to transactions involving digital assets” in its digital asset transaction FAQs.
Start by identifying what happened and the tax year. A purchase, a disposition, a transfer between accounts you own, and a receipt of crypto as compensation or a reward are not interchangeable events. Crypto received for services, for example, is generally ordinary income at its U.S. dollar fair market value when received; that value generally becomes its basis if included in income. A later sale of those units is a separate calculation.
This article covers U.S. federal treatment of digital assets held as capital assets by individuals. Mining or staking income, business activity, gifts, futures treated as section 1256 contracts, and complicated DeFi transactions may follow different rules or require separate analysis.
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What information do you need for each lot?
Calculate at the level of the particular units disposed, not from a portfolio-wide average unless the applicable identification rules permit that method. Gather records that let you connect the disposed units to their basis, holding period, transaction value, and fees. The IRS’s digital assets filing and records overview identifies key records to retain.
- Asset type and number of units disposed.
- Transaction date and time, and the transaction type.
- U.S. dollar fair market value at the relevant transaction time.
- The basis and acquisition date for the units disposed.
- Fees paid, what service each fee covered, and when the transaction occurred.
How to identify units can depend on whether they were held through a broker, a hosted wallet, or an unhosted wallet. The IRS’s current FAQs address identification and default identification; do not assume one method automatically applies across every account or wallet. Keep exchange statements, wallet records, transaction IDs, timestamps, and the method used to assign units.
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How do you determine the value in U.S. dollars?
Use the value at the relevant transaction time, rather than a later price quote. The IRS’s older virtual currency FAQs, which generally apply to transactions before January 1, 2025, describe using the amount recorded by an exchange for exchange-facilitated transactions. For an off-chain exchange transaction, they point to the exchange price at the date and time it would have been recorded on-chain.
For peer-to-peer transactions, the older FAQs describe valuation at the time the transaction is recorded on the ledger, or its on-chain equivalent. They say the IRS will accept values from an explorer that analyzes worldwide indices and calculates a value at an exact time; another valuation must be substantiated as an accurate fair-market-value representation. If received crypto has no published exchange value, the FAQs direct taxpayers to the fair market value of the property or services exchanged at that time. Preserve the supporting exchange record, explorer result, timestamp, or other valuation evidence.
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Cash sale
For a sale for U.S. dollars, the current IRS FAQ describes amount realized as cash received, plus the fair market value of services received to effect the sale, reduced by qualifying transaction costs allocable to the disposition. Subtract the adjusted basis of the units sold:
Gain or loss = amount realized − adjusted basis
Illustrative arithmetic only: if adjusted basis is $1,000 and amount realized after applicable disposition costs is $1,250, the gain is $250. If amount realized is $850, the loss is $150. These figures illustrate subtraction only; they do not establish whether a particular loss is deductible or how any limits apply.
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Crypto swap or spending
For a crypto-to-crypto exchange or a purchase made with crypto, determine the U.S. dollar value of the property received at the transaction time, then compare the amount realized under the applicable rules with the basis of the crypto transferred. The current IRS FAQs address exchanges and associated transaction costs separately. Do not assume a swap is tax-free simply because no dollars changed hands, or apply the cash-sale fee shortcut without checking the rule for that transaction type.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How do crypto fees affect basis and proceeds?
Fee treatment depends on the fee’s purpose and the transaction date. In its FAQs for transactions completed on or after January 1, 2025, the IRS defines digital-asset transaction costs as amounts paid in cash or property—including digital assets—for another party’s services to effect a purchase, sale, or disposition. Examples include transaction or gas fees, transfer taxes, and commissions. A cost to move crypto between wallets or accounts you own is not a transaction cost under that FAQ.
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| Transaction and fee | IRS treatment described in the cited guidance |
|---|---|
| Cash purchase completed on or after January 1, 2025; qualifying fee paid to effect the purchase | Include the qualifying cost in the basis of the acquired crypto under the applicable current FAQ. |
| Disposition completed on or after January 1, 2025; qualifying cost allocable to the disposition | Reduce amount realized by the qualifying cost under the applicable current FAQ. |
| Transfer between wallets or accounts you own; transaction completed on or after January 1, 2025 | The cost is not a digital-asset transaction cost under the current FAQ. |
| Cash purchase before January 1, 2025; acquisition fee or commission | The older virtual-currency FAQ says acquisition fees, commissions, and other acquisition costs are included in basis. |
| Disposition before January 1, 2025; disposition fee | The cited older guidance does not establish a blanket treatment for every pre-2025 disposition-fee pattern; check the guidance applicable to that transaction. |
The current IRS FAQs also give specific allocation rules for exchanges. In a materially different digital-asset exchange example, the relevant costs are not added to the basis of the newly received different digital asset. Apply the FAQ for the event rather than using a universal rule that every fee increases basis. See the IRS’s digital asset transaction FAQs for the transaction-specific treatment. The date boundary matters: the current digital-asset FAQs address transactions on or after January 1, 2025, while the older virtual-currency FAQs generally apply before that date.
How do holding period and tax reporting work?
For a capital asset, the IRS treats a holding period of one year or less as short-term and a period of more than one year as long-term. The holding period generally begins the day after acquisition and ends on the date of sale or exchange. This classification is separate from calculating the dollar gain or loss.
The IRS directs capital-asset sales, exchanges, and other dispositions to Form 8949, with totals generally flowing to Schedule D. Other kinds of crypto income may use different forms; not every crypto receipt belongs on Form 8949. The IRS says digital-asset transactions must be reported whether or not they produce a taxable gain or loss, and taxpayers must maintain sufficient records.
Do not assume a broker statement supplies your basis. In Tax Tip 2026-07, dated January 28, 2026, the IRS said most Forms 1099-DA for 2025 transactions would not include basis. Reconcile broker documents against your own lot and transaction records; the tip is available from the IRS.
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