Tax on cryptocurrency: what the IRS taxes and how to report
The IRS taxes crypto as property. Sales, swaps, spending, and income can trigger tax. Report capital trades on Form 8949 and Schedule D.
Vahe HakobyanEditor-in-chief
Updated Oct 5, 20263 min readFact-checked
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The rule comes from IRS Notice 2014-21.
Which crypto actions are taxable?
The tax treatment depends on what you do. Some actions create income or capital gains, while others do not. Giving crypto as a gift is not a sale, but the giver may need to file Form 709 if the gift is large.
- Buying and holding crypto is not taxable.
- Moving crypto between your own wallets is not taxable.
- Mining and staking rewards are income when received.
- Airdrops are usually income when you control the tokens.
- Crypto paid for work is income. Employees report wages; independent contractors use Schedule C.
- Crypto a business receives as payment is ordinary income or loss.
How are crypto sales and swaps taxed?
When you sell, swap, or spend crypto, you usually have a capital gain or loss. To find it, subtract your adjusted basis from what you received. Basis is generally what you paid plus certain costs, and the holding period sets short-term or long-term treatment. A Crypto Profit Calculator can handle that math.
Which IRS forms report crypto?
When you sell or exchange crypto held as a capital asset, report each transaction on Form 8949. You then total gains and losses on Schedule D.
What records and penalties apply?
Keep records that show your basis, holding period, and the value of each income event. If your return is inaccurate, the IRS can charge interest and penalties.
Frequently asked questions
A gift is not taxable income to you. Inherited crypto is generally property, and your basis is usually the value on the date of death.
You report it as a capital loss on your return. Losses can offset capital gains, and a limited amount may offset ordinary income each year. Extra losses usually carry forward.
If your return is inaccurate, the IRS can charge interest and penalties. The return also asks about digital asset activity, so a missing answer can draw attention.
