Crypto Tax in the US (2026): Everything the IRS Expects

Almost every surprise in US crypto tax comes from one idea, set out in IRS Notice 2014-21: crypto is property, not currency. That sounds abstract, but it has a very concrete consequence — crypto is treated like a stock or a plot of land, not like the dollars in your bank account.

Here's why that matters. When you spend dollars, nothing is "realized" — a dollar is worth a dollar. But when you hand over property that has changed in value, you realize a gain or loss right then. So each time you sell crypto for dollars, swap one crypto for another, or use crypto to pay for something, you've made a disposal: gain or loss = the fair market value you received (the proceeds) minus your cost basis (what you paid, in USD).

That single rule is why a crypto-to-crypto swap is taxable even though no dollars moved — you disposed of property. It's also why simply buying and holding crypto with dollars is not taxable: you haven't disposed of anything yet.

One thing everyone must do regardless: answer the "digital asset" question at the top of Form 1040. It's mandatory whether or not you had a taxable transaction; the taxable events themselves go on the schedules below.

Example (structure only): you buy crypto for $8,000 and later sell it for $15,000. Your gain is $15,000 − $8,000 = $7,000. Whether that $7,000 is taxed at ordinary rates or at the lower long-term rates depends on how long you held it (next section). SafeTax computes the $8,000 basis and the $7,000 gain for you — it does not apply the rate.

If property is the what, holding period is the how much. Under IRC §1222, the length of time you hold before disposing decides which rate category your gain falls into — and the dividing line is exactly one year.

Hold one year or less and it's a short-term gain, taxed at your ordinary income rates (the same rates as your salary). Hold more than one year and it's a long-term gain, taxed at the preferential long-term capital gains rates of 0%, 15% or 20%, depending on your taxable income (IRC §1(h)).

That one-year mark is often the single most valuable date in a US crypto investor's records — crossing it can move the same gain from the ordinary-rate column to the preferential-rate column. This guide states the structure only; it doesn't publish the income thresholds that separate the bands, because your exact figures depend on your full return.

Cost basis — the number everything hinges on. Your basis in purchased crypto is what you paid. For crypto you receive as income (mining, staking, airdrops, wages), your basis is its fair market value on the day you received it (Notice 2014-21) — the very amount you reported as income.

Example (structure only): you buy 1 unit at $20,000 and another at $30,000. Under weighted-average cost your basis is $25,000 per unit; sell one for $40,000 and your gain is $40,000 − $25,000 = $15,000.

Basis method and per-wallet tracking. You may use specific identification if you can document exactly which units you sold; otherwise FIFO applies. And since 1 January 2025, basis must be tracked per wallet / per account rather than pooled universally across everything you hold (Rev. Proc. 2024-28, with transitional relief under Notice 2025-7). SafeTax applies cost-basis accounting and produces the per-disposal proceeds, basis and gain/loss you need for Form 8949.

Not all crypto tax is about selling. Some crypto is ordinary income the moment you receive it, valued at its fair market value on that date — and that's a separate event from any capital gain later on.

Mining — Rewards are ordinary income at fair market value when received (Notice 2014-21, Q&A-8). If your mining rises to the level of a trade or business, it's also subject to self-employment tax and reported on Schedule C.

Staking — In Rev. Rul. 2023-14, the IRS confirmed staking rewards are included in gross income at fair market value in the year you gain dominion and control over them (i.e. you can sell or move them).

Airdrops and hard forks — Rev. Rul. 2019-24 treats new crypto from an airdrop following a hard fork as ordinary income once you have dominion and control over it.

The double-count that trips people up: income now, capital gain later. Suppose you receive $500 of staking rewards. That $500 is ordinary income today — and it becomes your cost basis in those coins. If you later sell them for $700, you have a further $200 capital gain on top. You're not taxed twice on the same value; you're taxed once on the income ($500) and once on the later growth ($200).

Back to the misconception from the top. In the US, exchanging one crypto for another is a taxable disposal. Swapping BTC for ETH is treated as selling the BTC at its market value, then buying ETH — the gain or loss on the BTC leg is realized at that instant (IRS Virtual Currency FAQs). Trading purely between cryptocurrencies generates taxable events, even if you never touch a dollar.

Example (structure only): you bought 1 BTC for $20,000. When it's worth $32,000 you swap it for ETH. Even though no cash changed hands, you've realized a $12,000 gain on the BTC at the moment of the swap.

And no, like-kind doesn't apply. A common hope is that a §1031 "like-kind exchange" defers the tax. It doesn't: since the 2017 Tax Cuts and Jobs Act, §1031 applies only to real property (IRC §1031(a)(1)) — it has not covered crypto since 2018.

This is why disciplined records matter: each swap must be valued in USD at the time of the trade, the basis of the disposed asset determined, and the gain or loss recorded. SafeTax reconstructs this for every swap across your accounts.

Net Investment Income Tax (NIIT). On top of capital gains tax, a 3.8% Net Investment Income Tax may apply to investment income (including crypto gains) above certain modified-AGI thresholds (IRC §1411). This guide states the 3.8% rate as a statutory fact but does not publish the income thresholds.

Capital losses — the silver lining. Losses on crypto disposals offset your capital gains. If your net losses exceed your gains, a limited amount can be deducted against ordinary income each year, and any remaining loss carries forward to future years indefinitely (IRC §1211(b), §1212(b)).

The wash-sale question. The wash-sale rule (IRC §1091) disallows a loss when you buy back a substantially identical "stock or security" within 30 days. Because the IRS classifies crypto as property rather than a security, the wash-sale rule by its terms does not currently apply to crypto — which is why loss harvesting is often discussed in a US crypto context. Note, however, that Congress has repeatedly proposed extending the rule to digital assets, so this position could change. Treat it as a moving area and confirm your situation with a US tax professional before relying on it.

Capital gains and losses. Each disposal is listed on Form 8949 (proceeds, cost basis, gain or loss, holding period), which totals through to Schedule D of your Form 1040.

Crypto income. Ordinary crypto income is reported as other income on Schedule 1, or on Schedule C if it is a trade or business, or as wages if you were paid in crypto.

The new 1099-DA. Under the 2024 final broker regulations, digital-asset brokers now report your dispositions on the new Form 1099-DA — gross proceeds for 2025 transactions (issued in early 2026), with cost-basis reporting phasing in from 2026. Here's the catch: broker-reported basis can be incomplete — transfers between platforms, older lots, and self-custody moves often leave gaps. Your own complete history is what makes Form 8949 accurate.

Foreign accounts. Holding digital assets through non-US platforms may trigger additional information reporting (FBAR / Form 8938). The rules here are evolving and thresholds apply — consult a US tax professional for your situation.

SafeTax imports your transactions, applies cost-basis accounting, and produces the disposal-by-disposal proceeds, basis and gain/loss you need to complete Form 8949 and Schedule D. SafeTax reports these figures; it does not compute your US tax liability — you or your tax professional apply the rates.

Mistake 1 — treating swaps as non-taxable. Every crypto-to-crypto swap is a disposal. It's the number-one source of US underreporting (and where this guide began).

Mistake 2 — banking on like-kind. §1031 has applied only to real property since 2018; it never covers crypto.

Mistake 3 — forgetting the double event on rewards. Mining and staking are ordinary income when received, then a capital gain on the later growth when sold.

Mistake 4 — leaving the Form 1040 digital-asset question blank. Every filer must answer it, transaction or not.

Mistake 5 — trusting 1099-DA alone. Broker-reported basis can be incomplete, especially across platforms — your own full history is what makes Form 8949 right.