Cryptocurrency is taxable in the U.S., and taxes apply to far more situations than just selling coins. Trading, spending, staking, mining and even receiving crypto can all trigger tax obligations. But as a digital asset, it can be confusing to know exactly how cryptocurrency is taxed.
This guide explains when crypto is taxed, how it’s taxed and what records you need in 2026.
When Cryptocurrency Is Taxable — and When It’s Not
The IRS treats cryptocurrency as property, not currency. That means most transactions are taxed similarly to stocks or real estate. The moment you dispose of crypto or receive it as income, the IRS generally considers that a taxable event.
The key is understanding what counts as a “disposition,” and what doesn’t.
What Are Taxable Cryptocurrency Events?
Most crypto taxes fall into two categories: capital gains or ordinary income.
The IRS provides detailed guidance on how cryptocurrency is taxed. Here are the most common taxable events
- Selling crypto for cash: Capital gain or loss based on price change
- Trading one cryptocurrency for another: Capital gain or loss on the crypto you gave up
- Using crypto to buy goods or services: Capital gain or loss based on how the crypto’s value changed
- Receiving crypto as payment for work: Ordinary income at fair market value when received
- Mining rewards: Ordinary income when the coins are earned
- Staking rewards: Ordinary income when rewards are credited to you
- Airdrops: Ordinary income once you gain control of the tokens
- Hard forks — if you receive new coins: Ordinary income when the new asset becomes accessible
In short: If crypto changes hands, changes form or shows up as income, the IRS usually wants a record of it.
Crypto Activities That Aren’t Taxable
Some crypto actions do not trigger taxes:
- Buying crypto with cash: Simply purchasing cryptocurrency with dollars doesn’t trigger a tax bill. Taxes generally apply only when you sell, trade or use the crypto later. Your purchase price becomes your cost basis for calculating future gains or losses.
- Holding crypto without selling or spending it: Unrealized price changes aren’t taxable. If your crypto goes up or down in value but you haven’t sold or spent it, there’s nothing to report yet. Taxes apply only when a transaction actually occurs.
- Moving crypto between wallets you own: Transferring crypto between your own wallets or accounts isn’t considered a sale or exchange, so it doesn’t create a taxable event. It’s still smart to keep records so your cost basis and transaction history stay accurate.
You don’t owe taxes just for owning crypto or transferring it between your own accounts.
Why this confuses people:
Crypto exchanges often show transfers, wallet movements and internal swaps as “transactions,” which makes people assume everything is taxable. The IRS only cares when ownership changes, value is realized or income is received.
Seeing both sides — taxable and non-taxable — in one place helps avoid unnecessary overreporting or missed income.
How Cryptocurrency Taxes Are Calculated
Once a taxable event occurs, the next question becomes, how much tax do you actually owe?
Capital Gains vs. Ordinary Income
Crypto taxes fall into two main buckets:
- Capital gains apply when you sell, trade or spend crypto. You’re taxed on the difference between what you paid and what you received.
- Ordinary income applies when you receive crypto as payment, rewards or compensation. The value is taxed just like wages or freelance income.
If you later sell that crypto, a second taxable event occurs.
Cost Basis, Holding Period and 2025 Updates
Your cost basis is simply what you paid for the crypto, including fees. It determines how much profit or loss you recognize when you sell or trade.
Your holding period determines whether your gain is:
- Short-term: Held one year or less, taxed at ordinary rates, or
- Long-term: Held over one year, generally taxed at lower capital gains rates
Why tracking matters: Without accurate purchase dates and values, you can’t calculate gains correctly — which can lead to overpaying taxes or triggering IRS questions later.
Starting in 2025, per the IRS, brokers and exchanges are moving toward enhanced wallet- and account-based cost basis tracking, similar to how stock brokers report securities. While full implementation is still rolling out, taxpayers remain responsible for maintaining their own accurate records.
Simple Example
You buy Ethereum for $2,000. Six months later, you sell it for $2,600.
- Cost basis: $2,000
- Sale value: $2,600
- Taxable gain: $600 for a short-term capital gain
If you had held it for more than one year, the gain would typically qualify for long-term rates instead.
Crypto Income: Mining, Staking, Airdrops and Getting Paid
Not all crypto taxes come from trading. Many people generate crypto as income — and that creates its own rules.
Why Crypto Income Is Taxed Differently
When you receive crypto as income:
- It’s taxed at fair market value on the day you receive it.
- If you later sell or trade it, you may owe capital gains tax on any price change.
This creates what many investors overlook: a two-step tax effect.
Common Income Scenarios
- Staking rewards: Rewards are taxable as ordinary income when credited to your wallet.
- Mining income: Mining rewards are taxable as income and may also trigger self-employment taxes depending on activity level.
- Freelance or job compensation paid in crypto: The crypto’s dollar value is treated like cash wages.
- Airdrops and hard forks: Tokens are generally taxable once you can control or sell them.
- Two-step tax effect: You receive $500 worth of crypto. That is taxable income. Later you sell it for $650, recording a $150 capital gain. That is a two-step transaction. Many taxpayers miss the first step and only report the sale — which can create underreporting issues.
Reporting Crypto on Your Taxes and Avoiding Costly Mistakes
Crypto reporting doesn’t need to be intimidating, but it does require organization.
What Records You Should Keep
Keep a simple transaction log that includes:
- Purchase and sale dates
- Dollar values at receipt and disposal
- Cost basis
- Exchange or wallet used
Most exchanges provide downloadable transaction histories, but they’re not always complete — especially if you move assets between platforms.
How Crypto Is Reported
At a high level:
- Form 8949 reports individual crypto transactions.
- Schedule D summarizes capital gains and losses.
- Form 1040 includes the required digital asset yes/no question.
Income from mining, staking or self-employment activity may also flow through business schedules depending on your situation.
5 Common Mistakes That Trigger Problems
- Assuming crypto swaps aren’t taxable
- Ignoring small transactions or micro-purchases
- Forgetting staking or airdrop income
- Losing cost basis records
- Relying solely on exchange tax forms
The IRS has increased digital asset enforcement and data matching. Clean records reduce stress if questions arise later — without needing fear-based assumptions.
Practical Next Steps
- Start tracking transactions early: Recording transactions as they happen keeps your records clean, defensible and far easier to reconcile at tax time.
- Use crypto tax software if you trade frequently: If you trade frequently or use multiple wallets, crypto-tax software helps consolidate transactions, improve accuracy and maintain consistent reporting.
- Consider professional help for complex activity or multiple wallets: If you have staking income, DeFi activity, large volumes or multi-year gaps, a tax professional can help ensure your reporting holds up and avoids costly corrections later.
Key Takeaways
Cryptocurrency taxes apply to far more than just selling coins. Trading, spending, staking, mining and receiving crypto can all trigger taxable events. Accurate record-keeping matters more than most investors expect, especially as reporting rules continue evolving into 2026 and beyond.
While crypto taxes don’t have to be complicated, staying organized and proactive helps avoid surprises at filing time. As always, individual situations vary, so general information should be applied thoughtfully. It may be best to consult with a tax professional if you have any involvement with cryptocurrency.
FAQ on Cryptocurrency Tax
- Do I owe taxes if I move crypto between my own wallets?
- No. Transfers between wallets you own are not taxable.
- Is buying something with crypto taxable?
- Yes. Spending crypto is treated as selling it, which can trigger capital gains or losses.
- Do I have to report crypto if I lost money?
- Yes. Losses still need to be reported and may offset other gains.
- What if I earned only a small amount from staking or airdrops?
- Income is taxable regardless of size, even if you didn't receive a tax form.
John Csiszar contributed to the reporting of this article.
Information is accurate as of Jan. 17, 2026.