How crypto capital gains are calculated in the US
Crypto capital gains are cost basis subtracted from fair market value at disposal. Holding period decides whether the gain is short-term or long-term.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
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Sort each crypto transaction into taxable or not taxable. Then work through each disposal with its own basis and fair market value.
Which crypto events are taxable?
The IRS has treated digital assets as property since Notice 2014-21 in 2014, so a taxable event usually turns on whether you disposed of the asset. A gain or loss is measured against your cost basis. Buying with US dollars and holding are not taxable events.
- Selling for US dollars creates a capital gain or loss.
- Swapping one crypto for another is a disposal at fair market value.
- Spending crypto is a sale for the value received.
- Earning crypto through staking, mining, or similar activity is taxable when you receive it.
How do I calculate each gain?
For each disposal, subtract your cost basis from the fair market value at the time of the disposal. Your cost basis is generally what you paid in US dollars. Hold the asset for more than a year and the gain usually gets long-term treatment, while a year or less is short-term. First-in, first-out is the default, but specific identification can select units if documented.
- 1List every disposalWrite down each sale, swap, and spend.
- 2Gather acquisition detailsFind the asset type, date, units, and fair market value in US dollars when you acquired each unit.
- 3Find the disposal valueUse exchange records or a price source for the fair market value on the disposal date.
- 4Subtract basis from valueFair market value minus basis gives the gain or loss. A negative result is a capital loss.
- 5Check the holding periodCount ownership from the day after you receive the asset through the disposal date.
- 6Choose a cost basis methodFirst-in, first-out is the default. Specific identification lets you pick units if your records identify them.
- 7Report the resultEnter each gain or loss on your return.
What records should I keep?
The Internal Revenue Code and regulations require records that support your return positions. For crypto, keep exchange records, wallet addresses, dates, amounts, and fair market values.
Frequently asked questions
No tax is due just for buying and holding, but reporting can still be required. If your return asks the digital assets question and you answer Yes, you must report your transactions even if they produced no gain or loss.
Treat the swap as a sale of the old coin at fair market value, then a purchase of the new coin at that value. Subtract your basis in the old coin to find the gain or loss.
Moving crypto between wallets you control is not taxable. If records are lost, rebuild them from exchange statements, blockchain explorers, and old tax returns.
Yes. Staking or mining rewards are generally ordinary income at the fair market value when received, and that value becomes your basis.
