Crypto taxes in the US: a plain-English guide

In the US, crypto is taxed as property: you can owe capital gains tax when you sell, swap or spend it, and income tax when you earn it through staking, mining, airdrops or work. This guide explains the rules as of October 2026, including the new Form 1099-DA and per-wallet cost basis tracking, in plain English.

How the IRS sees crypto

Since Notice 2014-21, the IRS has treated virtual currency as property, not currency. Today the IRS uses the broader term "digital assets," which covers cryptocurrencies, stablecoins and NFTs.

Property treatment is the key idea. Every time you get rid of a coin, you compare what you received for it with what you paid for it. The difference is a gain or a loss, just like selling a share of stock.

When you receive crypto as payment or as a reward, its fair market value in dollars at that moment is generally taxable income. That value also becomes your starting cost for the coins.

Taxable and non-taxable events

Most confusion comes from not knowing which actions count. Here is how the most common situations are usually treated.

The IRS lists these categories on its digital assets page, including the point that transferring between your own wallets is not a transaction unless you pay a fee with crypto.

Capital gains: short term vs long term

How long you held a coin decides the rate. If you held it one year or less, the gain is short term and taxed at your ordinary income tax rate (10% to 37%). If you held it more than one year, the gain is long term and gets lower rates of 0%, 15% or 20%.

For tax year 2026, the IRS set these long-term thresholds in Revenue Procedure 2025-32. They are based on your total taxable income, not just your crypto gains.

Higher earners may also owe the 3.8% net investment income tax on gains once modified adjusted gross income passes $200,000 (single) or $250,000 (married filing jointly). Those thresholds are not indexed for inflation.

Cost basis and lot methods

Cost basis is what you paid for a coin, including fees. Your gain or loss equals what you received minus your basis.

If you bought the same coin several times at different prices, each purchase is a separate "lot." When you sell part of your holdings, you need a method for deciding which lots you sold:

• First in, first out (FIFO): the oldest units go first. This is the default if you don't identify specific units.
• Specific identification: you choose which units you sold, for example the ones with the highest cost. You need records showing the date, cost and value of the exact units, made no later than the time of the sale.

Methods people call "HIFO" (highest in, first out) are simply a form of specific identification, so they only work if your records meet that standard.

The wallet-by-wallet rule (from 2025)

Starting January 1, 2025, you can no longer pool all your coins into one big basis calculation. Basis must be tracked separately for each wallet or account. If you sell bitcoin on Exchange A, only the lots held at Exchange A count.

To help people switch over, Revenue Procedure 2024-28 offered a safe harbor for making a reasonable allocation of any leftover ("unused") basis to the coins remaining in each wallet or account as of January 1, 2025. If you never documented that allocation, raise it with a tax professional.

For coins held at a broker, the IRS gave temporary relief so you can identify specific units in your own records or with a standing order, even if the platform cannot yet accept those instructions. Notice 2026-20 extended that relief through December 31, 2026.

Form 1099-DA: what brokers now report

Custodial platforms such as exchanges and some hosted wallets now report your sales on Form 1099-DA. The rules phase in:

• 2025 transactions: brokers report gross proceeds (what you sold for). Statements for 2025 were due to customers by February 17, 2026. Basis was generally not required.
• Transactions from January 1, 2026: per the 2026 Form 1099-DA instructions, brokers must also report cost basis for covered securities. In practice that means assets you acquired after 2025 in that broker's account and kept there until you sold.
• Coins you transferred in from another wallet are usually "noncovered," so the basis box may be blank or voluntary. You still have to report the correct basis yourself.
• Stablecoins and NFTs: brokers may report certain stablecoin sales in aggregate and skip them entirely if your total for the year is $10,000 or less. A similar optional rule for certain NFTs uses a $600 threshold. Those sales are still taxable even if no form arrives.

What happened to the DeFi broker rule

In late 2024, the Treasury finalized a rule that would have required some decentralized finance (DeFi) front ends to file 1099-DAs. Congress overturned it under the Congressional Review Act, and the President signed H.J.Res.25 on April 10, 2025 (Public Law 119-5).

That repeal only changed who reports. Gains and income from DeFi trades, lending and liquidity pools are still taxable, so you need to track them yourself.

The digital asset question and the forms you file

Form 1040 asks every filer whether, during the year, they (a) received digital assets as a reward, award or payment, or (b) sold, exchanged or otherwise disposed of a digital asset. You must check "Yes" or "No."

You can check "No" if you only held crypto, only bought it with dollars, or only moved it between your own wallets. If you sold, swapped, spent or earned crypto, check "Yes."

The IRS points to these forms:

• Form 8949 lists each sale or swap with dates, proceeds and basis. Totals flow to Schedule D.
• Schedule 1 (Form 1040) for staking, mining, airdrop and fork income if it isn't business income.
• Schedule C if you mine, stake or get paid in crypto as a business or independent contractor (self-employment tax may apply).
• Form 709 if you gave a gift above the annual exclusion.

Staking, mining and airdrop income

Revenue Ruling 2023-14 says that when a cash-method taxpayer receives staking rewards, their fair market value is income in the year the taxpayer gains "dominion and control," meaning the ability to sell or move them. The same applies when rewards come through an exchange's staking program.

Mining rewards follow the same logic. Airdrops and new coins from a hard fork are generally income when you gain control of them, as explained in Revenue Ruling 2019-24.

The value you report as income becomes your cost basis. When you later sell those rewards, you have a separate capital gain or loss, with the holding period starting on the day you received them.

Our staking guide explains how rewards work, and the staking calculator can help you estimate them.

Wash sales and tax-loss harvesting

For stocks, the wash-sale rule (Internal Revenue Code Section 1091) blocks a loss if you buy back substantially identical stock within 30 days before or after the sale. That rule is written for stock and securities.

As of October 2026, it does not apply to crypto you hold directly. That is why some investors sell a coin at a loss and buy it back quickly to "harvest" the loss.

That may change. On September 16, 2026, the House Ways and Means Committee approved H.R. 10357, the Digital Asset Tax Certainty Act, 38 to 5. According to the committee's summary, it would extend the wash-sale and constructive-sale rules to digital assets. It would also exclude gains and losses on regulated dollar stablecoins and on paying network fees under $10. The bill still needs full House and Senate passage and a signature, and any effective date would come from the final text.

Losses and the $3,000 limit

Capital losses first cancel out capital gains. If losses are larger than gains, you can deduct up to $3,000 of the net loss against other income ($1,500 if married filing separately), per IRS Topic 409. Any remaining loss carries forward to future years with no expiration for individuals.

Coins lost to a scam or a failed platform are harder. Theft and casualty deductions for individuals are heavily restricted, and results depend on the facts. A professional can tell you what applies. If you were scammed, see our security and scams hub for reporting steps.

Gifts and donations

Gifts: giving crypto to someone is not a taxable sale for you. For 2026, the annual gift exclusion is $19,000 per recipient. Above that, you generally file Form 709, though tax is rarely due because of the much larger lifetime exemption. The recipient usually takes over your cost basis, so they inherit your built-in gain.

Donations: donating crypto directly to a qualified charity generally means no capital gains tax on the appreciation. If you held it more than a year and itemize, you may be able to deduct its fair market value, subject to income limits.

The IRS has said a donation of crypto claimed at more than $5,000 needs a qualified appraisal; an exchange price alone is not enough. Charitable deduction rules also changed for 2026 under the 2025 tax law, so check the details with your preparer.

State taxes

Most states with an income tax start from your federal figures, so crypto gains and income usually flow into your state return too. A handful of states have no personal income tax. Rates, treatment of capital gains and local taxes vary, so check your state revenue department's guidance or ask a preparer licensed in your state.

Worked example (hypothetical)

Alex is a single filer. In tax year 2026:

1. Sale of Coin A. Alex bought Coin A for $2,000 in February 2025 and sold it for $5,000 in March 2026. Held more than a year, so this is a $3,000 long-term gain.
2. Swap of Coin B. Alex bought Coin B for $4,000 in January 2026 and swapped it for Coin C in June 2026, when Coin B was worth $2,500. That is a $1,500 short-term loss. Alex's basis in Coin C is $2,500.
3. Staking rewards. Alex received rewards worth $400 when they became available to move. That is $400 of ordinary income, and those coins now have a $400 basis.

Netting: the $1,500 short-term loss offsets part of the $3,000 long-term gain, leaving a $1,500 net long-term gain. If Alex's 2026 taxable income stays under $49,450, that gain could fall in the 0% bracket. If it sits in the 15% bracket, the federal tax on the gain would be about $225. The $400 of staking income is taxed at Alex's ordinary rate.

Try your own numbers with our profit and loss calculator.

Record-keeping that saves you later

The IRS expects you to prove your basis and holding periods. For every transaction, keep:

• The date and time, the asset and the number of units.
• The dollar value at that moment and any fees paid.
• Which wallet or account it happened in, plus transaction IDs for on-chain moves.
• Exchange exports downloaded every year. Platforms close and APIs change, so don't rely on getting history later.
• Your lot-identification choices or standing orders, recorded before each sale.

Tax software or a CPA?

If you have a few exchange trades and a 1099-DA that matches your records, mainstream tax software may be enough. Crypto tax tools help when you have many transactions, several wallets, or DeFi activity. They import exchange and on-chain data, track per-wallet basis and produce Form 8949.

Consider a CPA or enrolled agent with digital asset experience if you:

• Run a mining or staking business, or got paid in crypto as a contractor.
• Used DeFi lending, liquidity pools, bridges or derivatives.
• Have missing records, unfiled past years, or losses from a hack or bankrupt platform.
• Hold large positions, plan big gifts or donations, or live in more than one state.

Software is only as good as the data you feed it. Review its output, especially transfers between your own wallets, which tools sometimes mislabel as sales.

What's pending as of October 2026

• H.R. 10357 (Digital Asset Tax Certainty Act): approved by Ways and Means on September 16, 2026. It would extend wash-sale rules to crypto and add small-transaction relief, but it is not law.
• Broker relief: the IRS penalty and lot-identification relief for brokers runs on fixed dates (Notice 2026-20 runs through December 31, 2026). Watch for updates before filing 2026 returns.
• Market-structure law: the Senate did not advance the CLARITY Act in September 2026. See our laws and regulations guide for the wider picture.

Rules change often in this area. Check the IRS digital assets page each filing season, and get professional help for anything specific to your situation.

Updated October 4, 2026 by The Crypto Guide editorial team. Educational content, not financial, legal or tax advice. Spot an error? Request a correction.