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- For U.S. tax purposes, digital assets are considered property, not currency, according to the IRS.
- Exchanging one virtual currency for another is a taxable disposition that produces a capital gain or loss.
- Staking rewards are included in gross income at fair market value when you gain dominion and control over them, under Rev. Rul. 2023-14.
The single most important tax rule for crypto fits in one line from the IRS: for U.S. tax purposes, digital assets are considered property, not currency. Everything else follows from that. Selling bitcoin is treated like selling stock or a piece of property, not like spending dollars. This guide covers the federal rules as the IRS explains them; it is general information, not tax advice for your situation.
Taxable and not taxable
| Event | Taxable? | Type |
|---|---|---|
| Buying crypto with dollars and holding it | No | |
| Moving crypto between your own wallets or accounts | No, unless you pay the fee in crypto | |
| Selling crypto for dollars | Yes | Capital gain or loss |
| Swapping one crypto for another, including stablecoins | Yes | Capital gain or loss |
| Paying for goods or services with crypto | Yes | Capital gain or loss |
| Receiving crypto as pay for work or services | Yes | Ordinary income |
| Staking rewards | Yes, when you control them | Ordinary income |
| New coins from an airdrop after a hard fork | Yes, when received and controlled | Ordinary income |
The table follows the IRS digital assets page and its FAQs on virtual currency, Rev. Rul. 2019-24 on hard forks and airdrops, and Rev. Rul. 2023-14 on staking. The IRS says a hard fork with no new coins received is not income.
Swaps are taxable
This is the rule that surprises most new traders. The IRS FAQ says that if you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you recognize a capital gain or loss. Trading from one coin into another, even without ever touching dollars, is a sale of the first coin for tax purposes.
Figuring the gain
Your gain or loss is the difference between the fair market value of what you receive and your adjusted basis in the crypto you gave up, the IRS says. Basis is what you paid, including fees, commissions and other acquisition costs. If you received crypto as pay for services, the IRS says your basis is its fair market value in dollars when you received it; for coins from an airdrop after a hard fork, it is the amount you included in income.
Which units did you sell? If you hold the same coin bought at different prices, the IRS lets you identify specific units if your records show when each was acquired, its basis and its value at the time. If you do not specifically identify units, they are treated as sold in chronological order, first in, first out.
Short-term or long-term
The holding period for crypto you receive begins the day after you receive it, according to the IRS. Under the general capital gains rules in IRS Topic 409, assets held more than one year produce long-term gains, and assets held one year or less produce short-term gains, which are taxed as ordinary income.
| 2026 long-term rate | Single: taxable income | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | Up to $545,500 | Up to $613,700 |
| 20% | Above $545,500 | Above $613,700 |
Thresholds from Rev. Proc. 2025-32. If capital losses exceed gains, IRS Topic 409 allows up to $3,000 a year ($1,500 married filing separately) to offset other income, with the rest carried forward.
Income from crypto
- Pay in crypto. If you receive a digital asset in exchange for goods or services in a business context, the IRS says the income is ordinary income.
- Staking. Under Rev. Rul. 2023-14, the fair market value of staking rewards is included in gross income in the year you gain dominion and control over them, valued at that date and time.
- Airdrops after a hard fork. You have ordinary income equal to the fair market value of the new coins when they are recorded on the ledger and you can transfer, sell or otherwise dispose of them, the IRS says. That value becomes your basis.
Tip: Record the dollar value of crypto income on the day you receive it. You will need it twice: once to report the income, and again as your basis when you later sell.
Every return asks
Form 1040 includes a yes-or-no question about digital assets. The IRS says to answer yes if during the year you received digital assets as payment, as a reward, from mining or staking or from an airdrop, or if you sold, exchanged or otherwise disposed of digital assets. Simply holding, or buying with dollars without selling, is a no. How to report is in Reporting Crypto Trades on Your Tax Return: Forms 1099-DA, 8949 and Schedule D.
Records the IRS expects
The IRS requires records that document purchases, receipts, sales, exchanges and other dispositions, plus the fair market value in dollars of crypto received as income. You must report all taxable transactions whether or not you receive a Form 1099. Platform fees and network fees belong in those records; see Crypto Exchange Fees Explained: Every Cost Between Buying and Selling. Rules change, and a tax professional familiar with digital assets can help with complex histories.