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Crypto Taxes US

IRS rules, Form 1099-DA, short-term vs long-term capital gains, enforcement.

Tax year 2025 · filing year 2026

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Short answer

IRS treats crypto as property. Disposals = capital gains (short-term at ordinary rates if held ≤1 year; long-term at 0/15/20% if held >1 year). Staking, mining, airdrops-via-action, crypto-as-wages = ordinary income at receipt. Report on Form 8949 + Schedule D. Form 1099-DA from brokers (Coinbase, Kraken, etc.) starting 2025 — cost-basis reporting from 2026. The 1040 digital-asset question is a perjury hook. This is not tax advice — consult a CPA.

IRS classification

Notice 2014-21 established that virtual currency is treated as property for federal tax purposes. This framework has held through 2026, refined by multiple Revenue Rulings (2019-24 on forks, 2023-14 on staking rewards, etc.). Congressional crypto-specific legislation has been proposed repeatedly but the IRS treatment remains consistent: it's property.

Capital gains

Each disposal (sale, swap, spend, or gift above the annual exclusion) is a taxable event. Gain = proceeds minus cost basis.

Short-term (held ≤1 year)

Taxed at your ordinary income tax rate. 2026 brackets (verify current): 10%, 12%, 22%, 24%, 32%, 35%, 37%. Applies to most active-trading profits.

Long-term (held >1 year)

Preferential rates: 0% (low income), 15% (most middle-income), 20% (high income). Plus 3.8% Net Investment Income Tax (NIIT) for high earners. The difference between 24% short-term and 15% long-term is material — hold past 365 days where strategically possible.

Cost basis methods

Default: FIFO (first-in, first-out). Alternative: specific identification (specific ID), where you identify the specific lot being disposed of. For tax optimisation (HIFO — highest-in, first-out), you need to keep records proving specific lot identification. Post-2025, many exchanges provide Lot-ID functionality; document the method you use.

Ordinary income events

  • Staking rewards — Rev. Rul. 2023-14: income at FMV when you gain dominion and control (typically on receipt in your account).
  • Mining — self-employment income if trade/business; hobby income otherwise. Schedule C or Schedule 1.
  • Airdrops received via action — income at FMV on receipt.
  • Airdrops received without action — no action, typically no immediate tax; basis = zero; entire proceeds taxed as capital gain on later disposal.
  • Crypto as wages — W-2 income if employee, 1099-NEC if contractor. FMV at receipt, subject to FICA/payroll taxes.
  • Crypto received for services — self-employment income. Schedule C.

Form 1099-DA (new — 2025 onward)

The Infrastructure Investment and Jobs Act (2021) mandated crypto brokers to report customer activity to the IRS. Form 1099-DA phases in:

  • 2025 tax year (forms in early 2026): gross proceeds reported.
  • 2026 tax year (forms in early 2027): gross proceeds + cost basis reported.
  • Who issues: Coinbase, Kraken, Gemini, Crypto.com, Paxos, ItBit, and other "digital asset brokers" as defined by Treasury rules. DeFi protocols and self-custody wallets not directly covered (some rules are contested).

You must reconcile 1099-DA against your own records on Form 8949. Discrepancies trigger inquiries. See our Form 1099-DA explainer for the full phase-in, who issues it, and the DeFi carve-out.

What is NOT a taxable event

  • Buying crypto with fiat
  • Holding crypto
  • Transferring crypto between your own wallets (self to self)
  • Transferring to a spouse (spousal exemption)
  • Gifts below the annual gift-tax exclusion ($18,000 per recipient in 2024; verify current)
  • Receiving a gift (recipient has carryover basis, but no immediate tax event)

The 1040 digital-asset question

Form 1040 asks: "At any time during [year], did you: (a) receive (as a reward, award, or payment for property or services); or (b) sell, exchange, or otherwise dispose of a digital asset?"

Answer honestly. "No" when you had disposals is perjury. The IRS has used this question as a hook for enforcement; it is not a trivial question.

Enforcement trajectory

IRS crypto enforcement has intensified since 2019 with John Doe summonses against Coinbase, Kraken, Circle, and others. Form 1099-DA dramatically expands direct reporting. Penalties: 20% accuracy-related for negligence, 75% for fraud, criminal liability in severe cases. The IRS has opened dedicated Crypto Enforcement Division offices and hired specialist agents. Enforcement will continue to expand.

Practical filing workflow

  1. Gather 1099-DA from each exchange (delivered Jan-Feb following tax year).
  2. Export transaction history from each exchange AND each wallet.
  3. Use a crypto-tax tool (Koinly, CoinTracking, TaxBit, CoinLedger) to aggregate, classify, and produce Form 8949.
  4. Reconcile broker 1099-DA against your aggregated records. Flag discrepancies.
  5. Report on Form 8949, summarise on Schedule D. Staking/mining income on Schedule 1 or Schedule C.
  6. Answer the 1040 digital-asset question honestly.
  7. If DeFi-heavy or large-volume, engage a crypto-specialist CPA.

Where to hold crypto in the US

US has strong state-by-state regulatory variation. See best crypto banks in US, FDIC-insured crypto banks, is Coinbase safe, is Kraken safe.

Federal-level development: SEC SAB-122 (January 2025) rescinded the on-balance-sheet treatment that had blocked US banks from custodying customer crypto. Paired with OCC Interpretive Letter 1183, it cleared the path for BNY Mellon, State Street, and other trust banks to enter institutional crypto custody — changing the competitive landscape against non-bank custodians (Coinbase Custody, Fidelity Digital Assets).

Stablecoin reporting note: stablecoin yield (USDC, USDT, USDe) is taxable as ordinary interest income under current IRS guidance — separate from the broker-reporting regime applied to spot disposals. See stablecoin issuers ranked for the underlying reserves and regulatory context of each major issuer.

Practical how-to guides

For action-level guides on the most-common BTC, ETH, USDC, USDT, SOL, XRP, BNB, DOGE, ADA, TRX, AVAX, DOT, POL, LTC, LINK, DAI, UNI, XMR, XLM, and SHIB operations in the US — venue comparison + step-by-step + Travel Rule + tax handling:

Bitcoin

Ethereum

USDC

USDT (Tether)

Solana

XRP

BNB

Dogecoin

Cardano

Tron

Avalanche

Polkadot

Polygon

Litecoin

Chainlink

DAI

Uniswap

Monero

Stellar

Shiba Inu

Disclaimer

This page is general information, not tax advice. US tax law and IRS enforcement evolve continuously; your specific fact pattern may yield different outcomes. Consult a CPA or tax attorney familiar with crypto before filing. See terms of service.

Frequently asked questions

How does the IRS tax crypto? +
The IRS treats crypto as property. Most retail activity triggers capital gains (short-term ordinary rates if held ≤1 year, long-term preferential rates 0/15/20% if held >1 year). Ordinary income applies to: staking rewards, mining, airdrops where action was taken, crypto received as wages or payment for services. Form 8949 reports each disposal; Schedule D summarises. The IRS 1040 has a digital-asset question — answer honestly.
What is Form 1099-DA? +
Starting January 2025, US crypto brokers (regulated exchanges — Coinbase, Kraken, Gemini, Crypto.com, Paxos, etc.) began issuing Form 1099-DA to customers and the IRS. The form reports gross proceeds of each crypto disposal. Beginning 2026, brokers are also required to report cost basis on 1099-DA. You then match the 1099-DA to your own records on Form 8949. Discrepancies will trigger IRS inquiries.
What are the long-term vs short-term capital gains rates? +
Short-term (held ≤1 year): taxed at ordinary income rates (10%, 12%, 22%, 24%, 32%, 35%, 37% depending on income bracket). Long-term (held >1 year): 0%, 15%, or 20% depending on income (plus 3.8% NIIT for high earners). The 1-year distinction is important — selling 360 days after buying vs 367 days can be a 10-20 percentage point difference in tax rate.
How are staking rewards taxed? +
Ordinary income at fair market value on receipt date. The IRS 2023 Revenue Ruling 2023-14 clarified: rewards are income when you gain "dominion and control" (typically when they appear in your account). When you later sell the staked rewards, a separate capital-gains event applies on any additional gain/loss since receipt. The basis in the rewards equals the FMV at receipt.
What is a "disposal" under IRS rules? +
A disposal (taxable event) includes: selling crypto for fiat, swapping one crypto for another (BTC→ETH is a taxable BTC disposal), using crypto to purchase goods or services, gifting crypto above the annual gift-tax exclusion. NOT a disposal: buying crypto with fiat, holding crypto, moving crypto between your own wallets, receiving crypto as a gift (recipient), transferring crypto to a spouse (spousal exemption).
What cost-basis methods does the IRS allow? +
Default method was FIFO (first-in, first-out), but taxpayers can elect specific identification if they can demonstrate which specific unit is being disposed. For 2026+ tax years, brokers may offer Lot-ID functionality that lets you choose which lot to sell (HIFO, LIFO, specific ID) — this can be meaningfully tax-advantageous. LIFO and HIFO are not universally accepted; verify with a CPA and document your election.
What if I don't report crypto on my taxes? +
The IRS has materially increased crypto enforcement since 2019. In 2021-2025, the IRS obtained John Doe summonses against Coinbase, Kraken, Payward, and Circle, obtaining user data. Form 1099-DA starting 2025 gives the IRS direct reporting of all disposals at regulated brokers. The 1040 digital-asset question is a perjury hook — answering "No" when you had disposals is not a valid strategy. Penalties: 20% accuracy-related (negligent), 75% (fraud), criminal in severe cases.
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