How to Calculate Cryptocurrency Tax: Steps and Records
To calculate crypto tax, convert each taxable event to US dollars and subtract your cost basis. Swaps are taxable even when no cash changes hands.
Vahe HakobyanEditor-in-chief
Updated Oct 5, 20263 min readFact-checked
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- Swaps and spending crypto are taxable, even when you receive no cash.
- Cost basis is what you paid; proceeds minus basis is your gain or loss.
- Holding more than one year usually makes a gain long-term.
- Report capital gains on your return; earned crypto is income.
- Keep dates, amounts, and wallet addresses for every transaction.
You will list every crypto transaction and put a US dollar value on each taxable event. You need records that show what you paid and what the crypto was worth when you sold, swapped, spent, or earned it.
What counts as taxable crypto?
Cryptocurrency is property for US tax purposes. For each taxable event, convert the value on that date to US dollars and subtract your cost basis. Buying and holding are not taxable by themselves.
- Selling crypto for dollars.
- Swapping one crypto for another, even with no cash.
- Spending crypto on goods or services.
- Earning crypto as wages or contract pay.
- Moving crypto between your own wallets is usually not taxable, but a fee paid in crypto is.
How to calculate crypto tax step by step
You need records that show what you paid and what the crypto was worth when you disposed of it. Exchange statements and wallet data usually have these numbers.
- 1Gather recordsCollect exchange statements, wallet data, and dates for each transaction.
- 2List each eventWrite date, asset, amount, and what happened. Include swaps and crypto purchases.
- 3Convert to dollarsUse fair market value on the event date. For earned crypto, use the value when received.
- 4Find cost basisCost basis is usually what you paid, shown in US dollars.
- 5Calculate gain or lossProceeds minus cost basis equals your gain or loss.
- 6Classify holding periodThe holding period starts the day after you acquire the crypto and ends on the day you sell or exchange it. More than one year is long-term; one year or less is short-term.
- 7Report on your returnReport capital gains and losses on your tax return. You must report transactions even with no gain or loss. Employees report crypto wages as income; independent contractors use Schedule C (Form 1040).
What records to keep after filing
The IRS expects you to keep records that document each purchase, receipt, sale, exchange, or other disposition of crypto. Your records should show the fair market value in US dollars for crypto received as income.
Frequently asked questions
No tax is due on the purchase or holding alone. The taxable event comes later, such as when you sell, swap, or spend the crypto.
The US dollar value when you received it is ordinary income. That value becomes your cost basis later.
Report the capital loss. It can offset capital gains and some ordinary income, and unused losses may carry forward.
Software can import records and calculate gains and losses. Check wallet transfers and missing cost basis yourself.
