How to pay taxes on cryptocurrency in the US
You pay crypto taxes by reporting gains and income on your IRS return. The IRS treats digital assets as property, so swapping and spending can trigger tax.
Vahe HakobyanEditor-in-chief
Updated Oct 5, 20263 min readFact-checked
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Selling, swapping, and spending crypto usually create a taxable gain or loss. Crypto you receive as pay or rewards is income at its fair market value when you get it.
What makes crypto taxable?
For US tax purposes, the IRS treats digital assets as property, not as currency. Selling, swapping, and spending are the common triggers, because each usually counts as a disposition. Buying and holding with US dollars does not create a gain by itself.
How do you pay crypto taxes?
Start with your transaction history, then separate ordinary income from capital gains and losses. Sales and swaps go on capital gain forms, while pay and contractor income go on income forms.
- 1Check for taxable eventsIf you bought with US dollars and did not sell, swap, or spend, you may check No on the digital asset question. If you did any of those, you have something to report.
- 2Gather records and basisKeep records of each purchase, receipt, sale, exchange, or other disposition. Your cost basis is usually what you paid, and income crypto starts at its fair market value when received.
- 3Calculate each gain or lossSubtract your cost basis from the fair market value when you sold, swapped, or spent the crypto. A positive result is a gain, and a negative result is a loss.
- 4Report sales and incomeUse Form 8949 and Schedule D (Form 1040) for sales and swaps. Report employee pay as wages and contractor income on Schedule C (Form 1040).
- 5Pay through withholding or estimated taxesCover the tax through withholding or estimated tax payments. If you still owe at filing, pay the balance with your return.
What should you do after you file?
Keep your tax records and account protections in place after you file. The IRS may ask questions later, and you may find a missing transaction. Good records make an amended return easier.
- Keep a copy of your return and the forms you filed.
- Save transaction records and exchange statements in a secure place.
- Use two-factor authentication on exchange and wallet accounts.
- If you find a missed transaction, file an amended return and pay any extra tax.
- If you get an IRS notice, compare it with your records and respond by the deadline.
Frequently asked questions
Usually no, if you bought with US dollars and did not sell, swap, spend, or receive it as income. You may check No on the digital asset question.
Usually no. A transfer between wallets you own and control is not a sale by itself. A network fee paid in crypto can be a taxable disposal.
A gift of crypto is generally not income to you, and your basis usually carries over from the donor. Inherited crypto generally gets a basis equal to its value at the date of death.
If you fail to accurately report income, you may owe accrued interest and penalties. You can file an amended return and pay the additional tax.
