How to plan for crypto taxes before you sell
Crypto taxes are due on sales, swaps and staking rewards, so work out cost basis and holding periods before you sell. Form 1040 asks a digital asset question.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
- Work out cost basis and holding period for each coin.
- A hold of a year or less is short-term.
- Swaps and crypto payments can create a gain or loss.
- Keep dates, amounts, fees and wallet addresses.
It takes your purchase records, the fees you paid and your wallet addresses.
What to know before you start
Cost basis is generally what you paid for a coin plus fees, and for coins you received as income it is usually the fair market value when you got them. Your holding period runs from the day after you acquire a coin to the day you sell it, so a year or less is short-term and longer is long-term. Swaps and crypto payments count as sales, so each can create a gain or a loss, and staking rewards are usually income when you receive them.
Step-by-step tax planning for a sale
Before you sell, turn your records into a projected tax figure so you can see what the sale will cost you.
- 1Add up expected proceedsAdd the dollar value you expect from each planned sale. This figure is for your own estimate only.
- 2Subtract your cost basisTake what you paid, fees included, away from those proceeds. What is left is your projected gain or loss.
- 3Estimate and set asideWork out what you may owe and move that amount into a separate account before the sale.
- 4Check the current formsRead the IRS instructions on digital asset reporting before you file. You answer Yes or No to the digital asset question on Form 1040 or Form 1040-SR.
After the sale: records and safety
The IRS requires records that support the positions you take on your return.
Frequently asked questions
You do not owe tax on the loss itself, but you still report the sale. A capital loss can usually offset capital gains and a limited amount of ordinary income.
No. Moving coins between wallets that are both under your control is not a sale, and the IRS says you answer No to the digital asset question if that is all you did.
Keep the confirmations from each exchange and match every sale to the purchase it came from, fees included.
You report a sale for the year you sell, on your federal return. Other crypto income, such as staking rewards, is reported for the year you receive it.
