For U.S. federal income tax, calculate a cryptocurrency capital gain or loss by subtracting the asset’s adjusted basis from the amount realized on its sale or other disposition. The sale price alone is not the taxable gain. You also need to identify the units sold, account for qualifying acquisition and sale costs, determine whether the holding period is short- or long-term, and report the transaction using the forms and instructions for the tax year.
What is the capital-gains calculation?
For cryptocurrency held as a capital asset, the basic calculation is:
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Capital gain or loss = amount realized − adjusted basis
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Scan for outdated or missing drivers - takes under a minuteDriver Scan →Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →The IRS treats digital assets as property for federal income tax purposes, so general property tax principles apply. “Digital assets” is the IRS’s broader term; cryptocurrency is one type. This explanation covers U.S. federal treatment, not state or local taxes, and assumes the asset is held as a capital asset. See the IRS digital-asset transaction FAQs and Topic No. 409, Capital Gains and Losses.
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How to calculate gain or loss, step by step
- List each disposition and the units involved. A sale for U.S. dollars is a disposition. An exchange of cryptocurrency for other property, including another digital asset, can also require a gain-or-loss calculation. Record the asset, units, transaction date and time, and the wallet or account involved.
- Establish the adjusted basis of the units sold. For purchased assets, basis generally starts with the purchase cost in U.S. dollars. The IRS’s 2025 Instructions for Form 8949 state that a digital asset’s basis includes acquisition cost, transaction fees, commissions, transfer taxes, and other acquisition costs. Units received as income or in other circumstances can have a different basis history, so do not assume every unit has the same basis.
- Calculate the amount realized. For a cash sale, the IRS describes amount realized as cash received plus the fair market value of services received to effect the sale, reduced by allocable digital-asset transaction costs. Report the calculation in U.S. dollars.
- Subtract adjusted basis from amount realized. A positive result is a gain; a negative result is a loss. The IRS states that the difference between adjusted basis and amount realized determines gain or loss on a sale for U.S. dollars or similar currency in FAQ answer A52, added December 15, 2025.
- Determine the holding period and report the transaction. For a capital asset, a holding period of one year or less is short-term; more than one year is long-term. Use the Form 8949 and Schedule D instructions for the return year.
Example using hypothetical figures
Suppose you buy a unit for $1,000 and pay $10 in qualifying acquisition costs. Later, you sell it for $1,500 and pay $15 in qualifying sale costs. The basis is $1,010; the amount realized is $1,485; and the gain is $475 ($1,485 − $1,010). This is an arithmetic example, not an IRS-published statistic or a complete tax-return determination. Your records and the rules applicable to your transactions determine the actual basis, allocable costs, unit identification, and classification.
Which fees count in the calculation?
The treatment depends on what the fee paid for. The IRS defines digital-asset transaction costs as amounts paid for services to effect a purchase, sale, or disposition, and gives transaction or “gas” fees, transfer taxes, and commissions as examples. Acquisition costs are included in basis under the 2025 Form 8949 instructions. Qualifying costs directly connected to a sale reduce the amount realized in the IRS’s calculation.
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A fee to transfer assets between your own wallets or accounts is not treated as a digital-asset transaction cost for a purchase, sale, or disposition under the IRS FAQs. Keep fee records and distinguish transfers from costs that effect an acquisition or disposition; do not assume every gas fee is deductible or changes basis.
How do you identify the units sold and establish basis?
When you sell fewer than all the units of the same asset in a wallet or account, the units selected can affect basis and holding period. Current IRS FAQs describe specific-identification rules for hosted and unhosted wallets, with requirements that depend on the transaction period and wallet circumstances. If units are not specifically identified under the rule that applies, a default identification rule can apply. Do not rely on an old blanket claim that FIFO always applies; check the relevant tax-year guidance and preserve records supporting the method used.
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The IRS calls for records showing asset type, transaction date and time, units, U.S.-dollar fair market value at the time of the transaction, and basis. Retain documentation for purchases, receipts, sales, exchanges, and other dispositions. If an asset was received as compensation, a reward, or in another non-purchase transaction, document that event too: its basis may not be the same as the amount you paid when acquiring other units.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How do you report cryptocurrency sales?
For a disposition of a capital asset, the IRS directs taxpayers to Form 8949 and Schedule D. Use the instructions for the return year rather than carrying forward an older form’s box mapping. The 2025 Instructions for Form 8949 introduced digital-asset-specific boxes: G, H, and I for short-term transactions, and J, K, and L for long-term transactions.
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What Form 1099-DA changes—and what it does not
Broker Form 1099-DA reporting begins for covered transactions on or after January 1, 2025. The IRS describes covered brokers as including certain custodial platforms and other providers that take possession of assets in covered sale or exchange transactions. The 2025 Form 8949 instructions say that Form 8949 may not be required for certain transactions if all applicable broker statements report basis to the IRS and no correction or adjustment is needed. Check the return-year instructions to confirm that every condition applies.
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A broker statement does not replace your own complete transaction records. Reconcile reported proceeds and basis against your wallet, account, and fee records, and address any missing or incorrect information under the applicable instructions. See the IRS overview of Form 1099-DA.
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When this calculation is not the whole tax answer
This method is for cryptocurrency held as a capital asset. Assets held for sale to customers in a trade or business, compensation, mining or staking rewards, and other receipt situations can involve ordinary income, business reporting, or a separate basis calculation before a later sale. A later disposition may still require its own calculation, but do not treat the initial receipt as though it were necessarily a purchase.
The IRS distinguishes guidance for transactions before January 1, 2025 from guidance for transactions on or after that date. Check the current FAQs and the forms for the year involved, especially for unit identification and broker reporting. This article addresses federal income tax only; the cited federal sources do not establish state or local treatment.
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