How Crypto Is Taxed in the US: Trades, Staking and Form 1099-DA
The IRS treats crypto as property, so selling it, swapping one coin for another or spending it can create a taxable gain, while staking and mining rewards count as income. This guide covers taxable events, cost basis, the new Form 1099-DA, NFTs and the records every crypto holder should keep.
For US federal tax purposes, the IRS treats cryptocurrency and other digital assets as property, not currency. That single decision, first set out in IRS Notice 2014-21, drives almost every rule. Selling bitcoin, swapping ether for another token, or paying for something with crypto is treated like selling property: each can produce a capital gain or loss. Receiving crypto as pay or as a reward is treated as income. The rules are mostly familiar from stocks; what is different is how many taxable events everyday crypto activity creates.
The question on the front of Form 1040
Every individual return asks whether, during the year, you received digital assets as a reward, award or payment, or sold, exchanged or otherwise disposed of a digital asset. Simply buying and holding crypto with dollars, or moving it between your own wallets, generally allows a "No" answer. Almost anything else calls for a "Yes" and reporting.
What is taxable and what is not
| Activity | Generally taxable? | How |
|---|---|---|
| Buying crypto with US dollars | No | Sets cost basis |
| Holding crypto, even as it rises | No | Gains are unrealized |
| Transferring between your own wallets or accounts | No | Keep records to carry basis |
| Selling crypto for dollars | Yes | Capital gain or loss |
| Trading one crypto for another | Yes | Treated as selling the first at fair market value |
| Spending crypto on goods or services | Yes | Capital gain or loss on the crypto spent |
| Being paid in crypto for work | Yes | Ordinary income at fair market value when received |
| Mining and staking rewards | Yes | Ordinary income when you gain control of them (Revenue Ruling 2023-14 covers staking) |
| Airdrops received | Generally yes | Ordinary income when you gain control |
| Giving crypto as a gift | Not to the giver for income tax | Gift tax rules and filing may apply above the annual exclusion |
| Donating crypto to a qualified charity | Generally no gain recognized | A deduction may be available; appraisal rules apply to larger gifts |
The trade-to-trade rule surprises many people. Exchanging one token for another is not a "like-kind" swap; since 2018, like-kind exchange treatment has been limited to real property. Each swap is a sale of the first token at its dollar value at that moment.
Calculating the gain
The formula matches stocks:
Fair market value received − cost basis = gain or loss
Cost basis is what you paid in dollars, including fees. For crypto you received as income, basis is the fair market value you reported as income.
Holding period determines the rate:
- Held one year or less: short-term gain, taxed at ordinary income rates.
- Held more than one year: long-term gain, taxed at 0%, 15% or 20% depending on income, with the 3.8% net investment income tax possible for higher earners.
Losses offset gains, and up to $3,000 of net capital losses a year can offset ordinary income, with the rest carried forward.
Choosing which coins you sold
If you bought the same coin at different prices, the coins you are treated as selling determine the gain. Methods include first-in, first-out (FIFO) and specific identification, which can let you choose higher-cost units to reduce the gain if you have adequate records.
Starting in 2025, the IRS requires basis to be tracked account by account and wallet by wallet, rather than pooling all your holdings across platforms. The IRS issued transitional guidance (Revenue Procedure 2024-28) for allocating existing basis to each wallet. Anyone with holdings spread across several exchanges and wallets should make sure their records reflect this.
Form 1099-DA: the new reporting form
Under final Treasury regulations, US custodial platforms that act as brokers report digital asset sales on a new Form 1099-DA:
- For sales on or after January 1, 2025, brokers report gross proceeds.
- For certain assets acquired on or after January 1, 2026 and held at the same broker, brokers also report cost basis.
The forms are a big step toward the kind of reporting stock investors receive, but they have limits. A platform does not know your basis for coins you moved in from elsewhere, and transactions in self-custody wallets are not reported by anyone. The responsibility for accurate reporting stays with the taxpayer.
Where it goes on the return
- Capital gains and losses: Form 8949, totaled on Schedule D.
- Income from staking, mining, airdrops or payment for work: generally Schedule 1 as other income, or Schedule C if it is part of a trade or business, which can also bring self-employment tax.
- Employees paid in crypto: the employer reports wages on Form W-2 in dollar terms.
NFTs, stablecoins and other edge cases
- NFTs are digital assets, so the same property rules apply. The IRS has said (Notice 2023-27) that some NFTs can be treated as collectibles, for example one that represents a digital work of art or a gem, in which case long-term gains face the 28% maximum collectibles rate.
- Stablecoins are also property. Selling a dollar-pegged stablecoin usually produces little or no gain, but the transaction is still a disposition.
- Lost, stolen or worthless tokens have specific and limited deduction rules, and the treatment depends on facts such as whether a sale was possible. Professional advice is worth getting before claiming a loss.
- Decentralized finance (DeFi) activity, such as providing liquidity or borrowing against crypto, can raise questions the IRS has not fully addressed. Conservative reporting and good records reduce risk.
Records worth keeping
For every acquisition and disposition, keep the date, the asset and amount, the dollar value at the time, fees, and the wallet or account involved. Download full transaction histories from each exchange at least once a year, since platforms close, merge or limit access. Crypto tax software can import these histories and generate Form 8949, but its output is only as good as the data, so check for missing basis and transfers misread as sales.
Putting it into practice
The pattern is straightforward once the property rule clicks: buying and holding is not taxed; disposing of crypto is a sale; receiving it as pay or reward is income. The work lies in recordkeeping, especially for anyone who trades often or moves assets between platforms and wallets. Reviewing activity before year-end, when losses can still be realized and estimated payments made, is far easier than reconstructing a year of transactions in April.
This article explains US federal tax treatment of digital assets in general terms and is not tax advice. Rules and reporting requirements are evolving; check current IRS guidance and consult a tax professional about your own situation.
Frequently asked questions
Is buying crypto with dollars a taxable event?
No. Buying crypto with US dollars and holding it does not create tax. The purchase sets your cost basis, and tax arises later when you sell, trade, spend or otherwise dispose of it.
Is moving crypto between my own wallets taxable?
Transferring crypto between wallets or accounts you own is not a sale and is not taxable. Network fees paid in crypto for the transfer can raise their own reporting questions, and keeping records of the transfer helps you carry the original cost basis to the new wallet.
What if I did not receive a tax form from my exchange?
You still have to report taxable crypto transactions. Tax forms are an information report, not the source of the obligation, so taxpayers are expected to use their own records and exchange transaction histories to report gains, losses and income.
