What the IRS counts as taxable
For US tax purposes, digital assets are property, not currency. You must report digital asset transactions whether or not they result in a taxable gain or loss, and income from digital assets is taxable.
- Taxable: selling crypto for dollars or other currency.
- Taxable: exchanging one digital asset for another, including stablecoins.
- Taxable: paying for goods or services with crypto. You have a gain or loss on the crypto you spent.
- Income: receiving crypto as payment, as a reward or award, or from staking, mining or an airdrop.
- Not taxable on its own: buying crypto with dollars and holding it.
- Not taxable on its own: moving crypto between wallets or accounts you own, unless you paid a transaction fee with digital assets.
How gains and losses are taxed
Your gain or loss is what you received minus your basis. Basis is what you paid for the crypto, including fees, commissions and other acquisition costs, in US dollars.
If you held the crypto for one year or less, the gain is short-term and taxed at your ordinary income tax rates. If you held it for more than one year, it is long-term and taxed at 0%, 15% or 20%, depending on your taxable income. The IRS publishes the income thresholds for each rate every year in Topic no. 409.
People with significant investment income may also owe the net investment income tax (Topic no. 559).
Capital losses first offset capital gains. If losses are larger, you can deduct up to $3,000 a year ($1,500 if married filing separately) against other income and carry the rest forward to later years.
The digital asset question on Form 1040
Form 1040 asks whether, at any time during the tax year, you received a digital asset as a reward, award or payment, or sold, exchanged or otherwise disposed of a digital asset. The same question appears on Forms 1040-SR, 1040-NR, 1041, 1065, 1120 and 1120-S.
Answer "Yes" if you had any of those transactions. If you only bought crypto with dollars and held it, or only moved it between your own wallets, you can generally answer "No".
Which forms to file
- Form 8949, Sales and Other Dispositions of Capital Assets: one line for each sale or exchange of crypto held as a capital asset. Its totals carry to Schedule D.
- Schedule 1 (Form 1040), Additional Income: staking rewards, mining, airdrops and hard-fork coins when they are not part of a business.
- Schedule C (Form 1040): crypto received as an independent contractor or from a crypto business, including mining run as a business. Self-employment tax can apply.
- Form 1040 itself: crypto paid to you as an employee is wages.
Records to keep
For each purchase, sale, swap or payment, keep the date, the amount of crypto, its US dollar value at the time, and the fees. Since January 1, 2025, basis is tracked separately for each wallet or account, so note which wallet each coin was in. See our guide to cost basis for how that works.