Crypto Taxes US

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

Tax year 2025 · filing year 2026

Reviewed by Stephan Kulik · Last updated: 2026-04-21 · How we rank

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.

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

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

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.