We polled 10,000 U.S. crypto holders to learn more about how they’re using crypto and how the NCA can support them. The results were clear: many want more guidance when it comes to filing their taxes based on their crypto holdings.
If you’re one of them, this guide is for you. We’ll cover how the IRS and other tax agencies look at digital assets, what blockchain actions trigger taxes, common mistakes to avoid, and easy habits that can make tax time way less stressful.
How and why is crypto taxed?
In the U.S., the IRS treats cryptocurrency like property, similar to stocks or real estate. That means every time you sell, trade, or spend your crypto, you may owe capital gains or be entitled to deduct a capital loss. That’s because you’re “disposing” of an asset, and the government wants to know if you made a profit or a loss—the difference between what you originally paid for the asset and what you got when you disposed of it.
Here's how it works:
If you made money, it’s called a capital gain
If you lost money, it’s called a capital loss
For capital gains, the amount you owe depends on how long you held the crypto:
More than 12 months? You may qualify for lower long-term tax rates
Less than 12 months? It’s a short-term gain, taxed like regular income
Everyday actions that can trigger taxes
Some crypto moves feel routine but they still count as taxable events:
Trading one coin for another: Swapping one coin for another is a “taxable sale” in the eyes of the IRS, even if you never cash out. You’ll owe tax on the difference between what you originally paid for the coin and what the value you got for the coin when you traded it. That’s your gain or loss.
Buying items with crypto: Paying for coffee or a concert ticket in crypto? That also counts as a sale. You’ll owe tax on any gains between what you originally paid for the crypto (your “cost basis”) and the price of the item when you spent it. (Note: Congress is currently considering making these transactions exempt)
Earning tokens: Getting crypto through mining, staking rewards, airdrops, and referral bonuses is treated as income. You owe tax on the coin’s dollar value when you receive it, even if you don’t sell it right away because the IRS treats it like interest income on your bank account.
Redeeming stablecoins: Even stablecoins can trigger small tax events. If you buy one for $1 and later redeem it (by selling it) for $1.01, that 1-cent gain is technically taxable.
While moving crypto between wallets you own is not a taxable event, it’s still smart to keep good records, if ever questioned. Before you file, check the latest IRS rules. Tax laws can change, especially around new tools and technologies like crypto.
Smart record-keeping: making tax time easy
Crypto platforms don’t always track everything you need for taxes, especially if you move assets between wallets or exchanges. That’s why keeping your own records is key. Track the basics for every transaction, including:
When it happened: Date, time, and the dollar value at the time
What was involved: Type and amount of crypto involved
Costs and fees: Network or trading fees, which may affect your gain/loss
Where it happened: The wallet or exchange used
You can handle this two ways. Many holders download CSV/spreadsheet files from each exchange or wallet and then upload them to a tax tool that reconciles duplicates, calculates gains or losses, and generates Form 8949 (the attachment the IRS expects alongside Schedule D).
You can also use crypto-tax services that connect directly to your wallets and exchanges—typically via read-only APIs or public address lookups—to pull transactions automatically, keep running totals, and produce the same reports, spreadsheets, and tax documents for filing or for your accountant.
Tax forms to familiarize yourself with
Form 1040: At the top of your main tax return, you’ll see a yes/no question: “Did you receive, sell, exchange, or otherwise dispose of any digital asset?” Answer honestly, marking “yes” if you’ve bought, sold or traded crypto. This alerts the IRS that you had crypto activity to report.
Form 1099-B or 1099-DA: Some crypto platforms now send these to report your proceeds from crypto trades. They may leave out your cost basis, so review carefully and fill in missing details.
Form 8949: This is where you report each taxable event, separated into short-term and long-term. Your totals from this form flow into form Schedule D, which is your capital gains summary.
Schedule C: Use this form if mining, staking, or validating is part of a business you run regularly. It lets you deduct related expenses, but profits are also subject to self-employment tax. Small, hobby-level gains can stay on Schedule 1.
Losses still count
Down on a trade? Realized losses can offset gains elsewhere, and up to $3,000 of net capital losses can reduce your taxable income each year. Any remaining losses roll over and can be used in future years.
Losses from potential hacks or exchange failures may also be deductible in certain cases, so save any incident reports or correspondence for your records.
International considerations
While many countries tax crypto as property like the U.S. does, rules vary widely around the world. In some countries, occasional crypto trades may be treated as tax-free personal transactions, especially if they’re below certain thresholds.
In others, every crypto transaction is taxable, regardless of the amount. If you spend time abroad frequently or hold dual citizenship, be sure to check guidance from each country’s relevant tax authority.
Simple habits to make tax filing easier
Good tax hygiene practices are similar to everyday security practices when it comes to interacting with digital assets:
Consult a licensed tax professional: If you’re unsure about your crypto reporting, book a short meeting with a tax advisor who works with digital assets; doing so early in the year can save major headaches later. Plan another check-in whenever your situation changes significantly, such as after a big portfolio gain, starting a new business, or relocating to a different state.
Tag transactions as they happen: A quick label in a spreadsheet or an expenses tracking app (“staking reward”, “NFT mint”, “gift to cousin”, etc) can save hours of detective work next tax season.
Download monthly statements: Some platforms limit how long you can access your transaction history. Archiving PDFs now prevents surprises later.
Stick to one cost-basis method: The IRS lets you choose how to match sales to prior purchases, and that choice can affect your tax bill. FIFO (first-in, first-out) is the simplest and is often the default. “Specific ID” lets you pick the exact lots you’re selling—typically the highest-cost ones—to manage gains, but you must document the lots at the time of the trade and keep careful records. Whatever you choose, apply it consistently year after year.
Set aside a tax cushion: Crypto gains realized in May can create a tax bill that comes due as soon as the next tax deadline. Plan ahead, so you have some money set aside to pay taxes when they come due. You may also want to lock in losses in the same tax cycle you expect to realize gains.
Final thoughts
Paying crypto taxes doesn’t have to be confusing or cumbersome. Treat every trade or spend as the sale of a small slice of property, keep clear records, and revisit your approach if and when local tax rules evolve.
Start early—well before peak tax season—to save yourself time (and potential headaches) next April.
For more plain-English guides on crypto basics, keep exploring the National Cryptocurrency Association’s learning hub.