Crypto Taxes in the US: A Plain-English Overview (IRS)

In the US, the IRS treats crypto as property, and most buying, selling, swapping or earning of crypto has tax consequences. This is a plain-English overview of the general principles — not personal tax advice.

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How the IRS views crypto

The IRS treats cryptocurrency as property, not currency. That means the familiar rules for things like stocks broadly apply: when you dispose of crypto, you may have a capital gain or loss; when you earn it, it's usually ordinary income valued at the moment you received it.

There's also a digital-asset question near the top of Form 1040 that nearly every taxpayer must answer yes or no — a reminder that the IRS expects crypto activity to be reported.

Capital gains: disposing of crypto

You generally have a taxable disposal when you:

• Sell crypto for dollars.
• Swap one crypto for another — crypto-to-crypto trades are taxable, even with no cash involved.
• Spend crypto on goods or services.

Your gain is the value at disposal minus your cost basis (what you paid, including fees). How long you held it matters: assets held one year or less are typically taxed at short-term rates (like ordinary income), while those held more than a year may qualify for lower long-term capital gains rates.

Ordinary income: earning crypto

When you receive crypto rather than buy it, it's generally ordinary income based on its fair market value when received. Common examples include:

• Getting paid in crypto for work or services.
• Mining rewards, and in many cases staking rewards when you gain control of them.
• Some airdrops and certain rewards.

Crypto you reported as income also gets a cost basis equal to that value — so when you later sell or swap it, you calculate a further capital gain or loss from there.

Reporting and record-keeping

US reporting tends to flow through a few common forms. Exchanges increasingly issue tax forms, but the ultimate responsibility for accurate reporting is yours.

1. Answer the digital-asset question on Form 1040 honestly.
2. Track every transaction: date acquired, date disposed, proceeds, cost basis, and resulting gain or loss.
3. Report capital gains and losses on Form 8949 and summarize on Schedule D.
4. Report crypto income (mining, staking, payment) on the appropriate income lines or schedules.
5. Keep your supporting records, and consider crypto tax software or a CPA if you have many transactions.

Where to go next

Tax awareness pairs with the rest of responsible crypto use — keeping your coins secure and steering clear of scams. If you're in the UK, see our UK crypto tax overview. And always confirm specifics against current IRS guidance or a qualified professional.

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