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Clear out junk files and repair common Windows errorsFree Scan →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Repair Windows errors before they cause bigger problemsFix Now →Selling Bitcoin for U.S. dollars can create a taxable capital gain or loss. For federal income-tax purposes, the IRS treats Bitcoin and other digital assets as property. To calculate the result, subtract the Bitcoin’s adjusted basis from the amount realized on the sale. Your holding period, which Bitcoin units you sold, transaction costs, and records all affect the calculation and reporting.
When selling Bitcoin creates a capital gain or loss
The IRS says digital assets are property, so general property transaction rules apply. A sale of Bitcoin for dollars generally requires you to recognize a capital gain or loss. The result is not determined by how much cash you withdrew from an exchange; it depends on the sale proceeds and the basis of the specific units sold.
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For federal tax purposes, the IRS’s digital-asset FAQ states: “Digital assets are treated as property, and the general tax principles applicable to all property transactions also apply to transactions involving digital assets.” IRS digital-asset FAQ
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How to calculate the gain or loss
Capital gain or loss = amount realized − adjusted basis.
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For a sale, amount realized generally includes the cash you receive, less transaction costs allocable to disposing of the Bitcoin. The IRS gives transaction or “gas” fees, transfer taxes, and commissions as examples of costs that may reduce amount realized. A fee paid only to move Bitcoin between your own wallets is not a cost of effecting a sale under the IRS FAQ. IRS digital-asset FAQ
For Bitcoin you bought, basis is generally its U.S.-dollar cost. Acquisition transaction fees, commissions, transfer taxes, and other acquisition costs are included in digital-asset basis under the Form 8949 instructions. Bitcoin received through a different event may have a different basis, so purchase cost is not a universal rule for every situation. IRS Form 8949 instructions
Illustration: If adjusted basis is $10,000 and amount realized after allocable sale costs is $14,000, the arithmetic difference is a $4,000 gain. This is an illustration, not a calculation of anyone’s tax bill. The correct basis, amount realized, tax character, and treatment of losses depend on the facts and applicable rules.
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How the holding period changes the result
The holding period determines whether a capital gain or loss is generally short-term or long-term:
- Short-term: held for one year or less.
- Long-term: held for more than one year.
The IRS counts the holding period starting the day after you acquire the Bitcoin and ending on the date you sell or exchange it. IRS Form 8949 instructions
Which Bitcoin units you sold matters
If you acquired Bitcoin at different times or prices, identifying the units disposed of can affect both basis and holding period. The IRS describes specific-identification rules and default identification rules; which applies depends on matters including whether the Bitcoin was held in a custodial broker account or an unhosted wallet, and when the transaction occurred.
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The IRS FAQ distinguishes sales during 2025 from transactions after December 31, 2025. For transactions after that date, under the conditions described in the FAQ, the broker must receive the specified unit identification or a qualifying standing instruction by the time of sale. If the applicable specific-identification requirements are not met, the IRS describes an earliest-acquired-units default rule for the relevant account or wallet. Check the IRS guidance applicable to your transaction date and custody arrangement, and keep records that support the units identified. IRS digital-asset FAQ
How to report a Bitcoin sale on your federal return
For Bitcoin held as a capital asset, individuals generally report sales, exchanges, and other dispositions on Form 8949, then summarize capital gains and deductible capital losses on Schedule D (Form 1040). Follow the instructions and exceptions for the tax year you are filing; the forms can change. Form 8949 also helps reconcile amounts shown on Forms 1099-B or 1099-DA, or substitute statements, with the amounts reported on your return. IRS Form 8949 instructions IRS Schedule D instructions
Capital losses are subject to limitations on deductibility. The calculation of a gain or loss is not by itself a determination of how much tax you owe.
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What records to keep
Keep records that let you establish what you acquired or received, what you disposed of, and how you calculated basis and proceeds. The IRS identifies the following useful transaction details:
- Transaction type and date and time.
- Number of Bitcoin units involved.
- U.S.-dollar fair market value.
- Basis and relevant acquisition or disposition costs.
Retain supporting records for purchases, receipts, sales, exchanges, and other dispositions. A broker statement may not include activity across your other wallets or platforms, so compare it with your own records. IRS digital-asset FAQ IRS Form 8949 instructions
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What Form 1099-DA tells you—and what it may not
Broker reporting on Form 1099-DA begins for covered digital-asset transactions on or after January 1, 2025. In a January 2026 reminder, the IRS said many Form 1099-DA statements for 2025 sales will not include basis, so taxpayers may need to calculate it from their own records. The IRS also says taxpayers must report related income, gains, or losses whether or not they receive the form. IRS January 2026 taxpayer reminder IRS broker-reporting announcement
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Do not treat a Form 1099-DA as proof that the reported basis is complete—or assume that no form means there is nothing to report. Match the statement against your acquisition and sale records before preparing the return.
What this federal overview does not determine
This explanation covers the general U.S. federal framework for an individual selling Bitcoin held as a capital asset. It does not calculate your tax, resolve every transaction’s tax character, or address state, local, or non-U.S. obligations. Tax-year forms and transaction-specific facts control; where records are missing or unit-identification rules are unclear, a tax professional experienced with digital assets may be able to help.
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