In the United States, cryptocurrency held as an investment is generally treated as property for federal income-tax purposes. Selling it for dollars, exchanging it for another digital asset, or otherwise disposing of it can create a capital gain or loss. You calculate the result by comparing your adjusted basis with the amount realized, then classify it as short-term or long-term based on how long you held the asset.
This guide explains the federal rules for individual investors, the records and forms required, and the 2025–2026 transition to Form 1099-DA. It is general information, not individualized tax advice. State, foreign, business-entity, mining, staking, gift, fork, NFT, DeFi and specialized-derivative rules can require separate analysis.
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What counts as a taxable cryptocurrency disposition?
The Internal Revenue Service applies general property-transaction principles to digital assets. If you hold cryptocurrency as a capital asset—normally an investment rather than inventory or compensation—disposing of it can produce a capital gain or loss.
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Selling cryptocurrency for U.S. dollars
A sale for dollars is the clearest example. You compare the proceeds, after allocable selling costs, with your adjusted basis in the units sold. A gain is taxable income; a loss is generally a capital loss subject to the normal capital-loss rules.
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Trading one digital asset for another
“Do I pay taxes when I trade one crypto for another?” Generally, yes. An exchange of bitcoin for ether, a stablecoin for a token, or one token for another is a disposition of the asset you gave up. Determine the U.S.-dollar fair market value at the transaction time, identify the basis of the asset surrendered, and calculate the resulting gain or loss. Do not wait until you convert the received asset to dollars; the exchange itself can be the taxable event.
Other dispositions
Using cryptocurrency to pay for goods or services, transferring it in a transaction that is economically a sale, or otherwise disposing of an investment position may also require a gain-or-loss calculation. Keep the same transaction-level records even when no dollars move into your bank account.
Activities that may not be capital-gain transactions
Not every receipt or transfer belongs on a capital-gains schedule. Cryptocurrency received as wages, payment for services, business revenue, mining rewards, staking rewards, or certain fork-related distributions can involve ordinary income, self-employment income, or other rules before a later sale is considered. Gifts, NFTs, DeFi arrangements and derivatives can have additional issues. Separate those activities from personal investment trades and obtain advice for fact-specific situations.
State income-tax treatment and non-U.S. taxation are outside this federal overview. A transaction that is a capital gain federally may be treated differently by a state or another country.
How to calculate a cryptocurrency capital gain or loss
For a dollar sale, the basic formula is:
Capital gain or loss = amount realized − adjusted basis
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Both sides must be measured for the particular units or lot disposed of. The calculation is not simply the difference between the account’s total deposits and withdrawals.
1. Determine adjusted basis
Basis is generally what you paid for the units, adjusted under applicable tax rules. Include acquisition costs that are properly allocable to the purchase. If you received the asset in a non-purchase transaction, its basis may depend on the rule governing that receipt. Identify the exact units sold and preserve the exchange or wallet records supporting the basis.
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For a sale, amount realized is the cash received, with the fair market value of property or services received when applicable, reduced by digital-asset transaction costs allocable to the disposition. IRS guidance identifies transaction or gas fees, transfer taxes and commissions as examples of potentially allocable costs. A fee paid only to move assets between your own wallets is not treated as a transaction cost for a purchase or disposition in the IRS FAQ’s example.
Fees can be charged in cryptocurrency or dollars. Record the fee amount and its U.S.-dollar value at the relevant time, and apply current IRS guidance to the transaction’s facts.
Illustrative dollar-sale calculation
Assume you buy a lot for $4,000 and pay a $40 acquisition fee that is properly added to basis, producing a $4,040 adjusted basis. You later sell that lot for $7,000 and pay a $70 selling fee that is allocable to the disposition. The illustrative amount realized is $6,930 ($7,000 minus $70), and the illustrative gain is $2,890 ($6,930 minus $4,040). The figures are an example, not a tax determination for every fee arrangement.
Calculating an exchange
For a crypto-to-crypto trade, record the fair market value in U.S. dollars of what you received at the exchange time, the basis of what you surrendered, the units, and all allocable fees. The resulting gain or loss belongs to the disposed asset. The asset you receive becomes a new tax lot whose basis and holding period must be determined under the applicable property-exchange rules, so retain the transaction record rather than relying on a platform’s abbreviated history.
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Short-term versus long-term cryptocurrency gains
“Is crypto taxed as a short-term or long-term gain?” It depends on the holding period for the specific units disposed of:
| Holding period | Federal category | How the IRS counts it |
|---|---|---|
| One year or less | Short-term capital gain or loss | Begins the day after acquisition and ends on the disposition date. |
| More than one year | Long-term capital gain or loss | Must exceed one year under the same day-after-acquisition counting rule. |
Use the acquisition date and time for the particular lot, not the date you first opened an exchange account. If you bought the same token on multiple dates, a single sale can involve multiple lots with different holding periods and bases. Your records should show which units were disposed of and why the lot-identification method you used is supportable.
A practical filing workflow
Work transaction by transaction before transferring totals to your return. This sequence helps separate capital activity from income that belongs elsewhere.
- List every disposal. Include dollar sales, crypto-to-crypto exchanges, payments for goods or services, and other investment dispositions. Do not include transfers between wallets you own as sales merely because the blockchain records a movement.
- Classify the activity. Mark whether each asset was a personal investment, business property, compensation, mining or staking receipt, gift, fork distribution, NFT, DeFi position or derivative. Capital-asset rules do not automatically govern every category.
- Match each disposal to units or lots. Capture the asset type, quantity, acquisition date and time, disposition date and time, basis, and the lot-identification method.
- Convert values to U.S. dollars. Record fair market value at the transaction time for proceeds, property received and fees. Keep the exchange or wallet data supporting the conversion.
- Apply allocable costs. Include eligible purchase or sale costs in the appropriate basis or amount-realized calculation. Treat transfers between your own wallets separately from acquisition and disposition fees.
- Calculate gain or loss and holding period. Compute amount realized minus adjusted basis for each disposed lot, then label the result short-term or long-term.
- Reconcile your totals. Compare your ledger with exchange exports, wallet histories, bank statements and any broker statement. Investigate duplicates, missing transfers, wrapped-asset conversions and transactions shown in different units.
- Complete the current tax-year forms. For 2025 tax-year capital-asset dispositions, IRS Publication 550 directs taxpayers to Form 8949 to calculate and report each transaction, with totals carried to Schedule D (Form 1040). Always use the instructions for the filing year and your circumstances.
What records must you keep?
The Internal Revenue Service states on its “Digital assets” page: “The Internal Revenue Code and regulations require taxpayers to maintain sufficient records to establish the positions taken on federal income tax returns.” That obligation remains yours even when an exchange or broker supplies a tax report.
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For each acquisition, receipt, sale, exchange or other disposition, retain:
- Asset name and, when relevant, contract address or network;
- Units or fractional units;
- Transaction date and time, including the time zone where available;
- U.S.-dollar fair market value at the transaction time;
- Adjusted basis and how it was determined;
- Transaction, gas, commission and transfer-tax amounts;
- Wallet addresses, transaction hashes and exchange order IDs;
- Statements, CSV files, invoices, payment records and screenshots that explain the entry; and
- Evidence supporting the lot-identification method and any transfers between wallets you control.
Export records regularly. An exchange can close an account, change its export format or omit activity that occurred in an external wallet. Keep an original copy of every file and a readable ledger that ties each disposal to its acquisition history.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Form 1099-DA: what it shows and what it does not
Form 1099-DA is part of the IRS broker-reporting transition for digital assets. The dates matter when you file 2025 returns in 2026:
| Date | Reporting change | Practical effect |
|---|---|---|
| January 1, 2025 | Gross-proceeds reporting begins for covered transactions effected on or after this date. | A covered broker may report sale proceeds even when basis is absent. |
| January 1, 2026 | Basis reporting begins for certain covered transactions effected on or after this date. | Basis information phases in; it is not universal for every transaction or broker. |
| February 17, 2026 | Brokers must furnish 2025 Form 1099-DA statements by this date, according to IRS Tax Tip 2026-07. | Most 2025 statements will not include basis, so taxpayers still need their own records. |
The rules apply to specified brokers that take possession of customer assets. Decentralized or non-custodial brokers that do not take possession are not included in that reporting scope described by the IRS. Your use of a self-custody wallet therefore does not necessarily produce a Form 1099-DA.
Do I have to report crypto if I did not get a 1099?
Yes, if the transaction is taxable. The IRS says taxpayers must report taxable income, gains and losses whether or not a Form 1099-DA arrives. A missing form does not eliminate the filing obligation, and a form’s proceeds figure does not replace your basis reconstruction.
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What if the form’s numbers are wrong?
Compare the statement with your complete ledger. Check whether it omits self-custody activity, treats transfers as sales, duplicates a transaction, or lacks basis. Report the accurate taxable result using the applicable Form 8949 and Schedule D instructions, and retain documentation explaining any difference. Ask the broker for a correction when appropriate, but do not wait for a corrected statement to begin assembling your records.
Broker-held accounts versus self-custody
| Issue | Broker-held activity | Self-custody or non-custodial activity |
|---|---|---|
| Possible Form 1099-DA | Covered brokers taking possession may report gross proceeds for transactions from January 1, 2025; basis reporting phases in for certain transactions from January 1, 2026. | The IRS broker-reporting scope does not include decentralized or non-custodial brokers that do not take possession. |
| Who tracks basis? | You remain responsible for complete basis, including assets transferred in or out. | You must build the record from wallet data, counterparties and exchange records. |
| Common reconciliation risk | Transfers may appear as disposals if account history is incomplete. | On-chain movements can be mistaken for sales without wallet-to-wallet matching. |
Optional software for organizing records
Tax-reporting software can connect exchange and wallet data, classify transfers and produce a report that helps populate tax forms. For example, CoinTracker’s documentation describes U.S. tax reports and CSV exports, with workflows that can connect reports to tax-preparation products such as TurboTax or H&R Block. Its service documentation also says the software does not itself provide tax filing or tax preparation.
Use any software as an organizing aid, not as the legal authority for your return. Review imported lots, fees, missing transfers, chain activity and unusual transactions manually. Integrations and supported workflows can change, so verify the current product documentation before relying on an export.
When professional help is especially important
Consider a qualified tax professional when you have high-volume trading, margin or lending, liquidity-pool activity, staking or mining, hard forks, a business or entity, compensation paid in digital assets, gifts, NFTs, foreign reporting, lost records, amended returns, or derivatives. Those facts can affect income character, basis, valuation, information reporting and more than one tax form.
Bring the professional a complete transaction export, wallet addresses, acquisition history, Form 1099-DA statements, prior returns and a written explanation of any assumptions. A professional can apply current federal and state rules to facts that this general guide does not resolve.
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