United States cryptocurrency tax guide

What this guide covers

This guide covers how the IRS taxes cryptocurrency for the 2025 tax year (returns filed in 2026), based on IRS Notice 2014-21 and the IRS's current Digital Assets guidance. It doesn't cover state-level taxes, which vary by state. This is educational information, not individualized tax advice.

Tax treatment of cryptocurrency

The IRS taxes your crypto as property, not as currency (Notice 2014-21). That one classification drives everything else: the same tax rules that apply to selling stock or real estate apply to selling crypto. Dispose of it and you may owe capital gains tax. Receive it as payment and it's ordinary income, valued at what it was worth the moment you received it.

Common taxable events

• Selling crypto for US dollars — a capital gain or loss equal to proceeds minus cost basis (what you paid for it).
• Swapping one cryptocurrency for another — treated as disposing of the asset you gave up, separate from acquiring the new one.
• Spending crypto on goods or services — treated as a disposal at the crypto's fair market value on the date of the purchase.
• Receiving crypto as payment for goods or services — ordinary income at fair market value when received (Notice 2014-21).
• Mining and staking rewards — generally ordinary income at fair market value when received; that same amount typically becomes your cost basis for a later sale.
• Airdrops — the IRS treats airdropped tokens as ordinary income once you gain dominion and control over them (once they're yours to use).

Potentially non-taxable events

• Buying crypto with US dollars and holding it, without disposing of it, isn't itself a taxable event.
• Transferring crypto between wallets you own and control is generally not a disposal, as long as you keep ownership throughout.
• A gift of crypto is generally not taxable income to the recipient when given. Separate gift-tax rules may apply to the giver above annual or lifetime exclusion amounts, which this guide doesn't cover in detail.

Tax rates and thresholds

How long you held the crypto decides your rate. Hold it one year or less before disposal and any gain is short-term, taxed at your ordinary federal income tax rate. Hold it more than one year and the gain is long-term, taxed at the federal long-term capital gains rates (0%, 15%, or 20%, depending on your total taxable income). Crypto you receive as income — payment, mining, staking, airdrops — is taxed at ordinary income rates based on its fair market value when received. This guide doesn't reproduce the full federal income tax bracket tables, which change annually and depend on filing status — check the current IRS tables for the exact figures that apply to your income and filing status.

Cost basis and calculation

Your cost basis is generally the fair market value of the crypto, in USD, at the time you acquired it, plus any directly attributable fees. For crypto you received as income, the amount you included as income becomes your cost basis going forward. You need to track basis per unit or lot. Specific identification of which units you sold is allowed if you document it adequately; otherwise, a default method such as first-in-first-out typically applies. Transaction and network fees paid to acquire or dispose of crypto are generally added to basis or subtracted from proceeds.

Reporting and compliance

• Form 1040 asks a direct digital-asset question — you must answer it on every return.
• Capital gains and losses from crypto sales and exchanges go on Form 8949, with totals carried to Schedule D. For 2025, new boxes (G/H/I for short-term, J/K/L for long-term) specifically identify digital asset transactions.
• Crypto you received as income is reported as ordinary income on the form or schedule that matches its source (for example, Schedule C for business/mining income, Schedule 1 for other income) — not on Form 8949.
• Form 1099-DA is the information return brokers use to report digital asset sales to the IRS and to you, once broker reporting applies — check whether the exchanges you used issued one.

Residency and cross-border issues

If you're a US citizen or resident alien, you're generally taxed on worldwide income regardless of where a crypto exchange is based or where a transaction technically occurs — using a non-US exchange doesn't by itself change your US tax liability. Separate reporting regimes such as FBAR and FATCA can apply to foreign financial accounts; whether they extend to a given foreign crypto exchange account depends on specific facts this guide doesn't resolve. Check current IRS guidance or a qualified preparer for cross-border situations.

Example

This example is hypothetical, for illustration only. Alex buys 1 BTC for $30,000 — that becomes Alex's cost basis — and sells it 18 months later for $45,000. Because the holding period exceeds one year, the $15,000 gain is a long-term capital gain, taxed at Alex's applicable long-term capital gains rate rather than ordinary income rates. This example doesn't reflect any specific taxpayer's actual tax rate, which depends on total income and filing status.

Official resources

• IRS Digital Assets hub: https://www.irs.gov/businesses/small-businesses-self-employed/digital-assets
• IRS Notice 2014-21 (PDF): https://www.irs.gov/pub/irs-drop/n-14-21.pdf
• 2025 Instructions for Form 8949: https://www.irs.gov/instructions/i8949

Limitations and review information

Tax year covered: 2025. Last verified: October 10, 2026, against IRS.gov and Notice 2014-21. Known gaps: this guide doesn't cover the precise federal income tax bracket figures, DeFi-specific guidance (lending, liquidity pools), or state-level tax treatment. The IRS's own consolidated FAQ page states it applies to transactions completed before January 1, 2025, and newer guidance may further refine specific scenarios — always confirm current-year specifics against IRS.gov or a qualified US tax professional before filing. This is educational information only, not individualized tax or legal advice.