Cryptocurrency taxes can become complicated when you sell, exchange, receive or otherwise dispose of digital assets. Therefore, understanding which transactions may affect your tax return is an important part of owning crypto.
Bitcoin, Ethereum and other digital assets can create different tax consequences depending on what you do with them. For example, buying cryptocurrency and holding it generally has a different tax result from selling it for cash or exchanging it for another digital asset.
In addition, receiving cryptocurrency for services, business activity or other forms of income can involve separate reporting requirements. Good records are especially important because taxpayers may need acquisition dates, cost basis and transaction values when preparing a return.
DIGITAL ASSETS & TAXES
Crypto Transactions Can Have Tax Consequences
For federal tax purposes, the IRS generally treats digital assets as property. As a result, disposing of cryptocurrency can create a gain or loss that taxpayers may need to report on a federal income tax return.
However, not every crypto activity creates the same tax result. Simply purchasing a digital asset with U.S. dollars and continuing to hold it differs from selling, exchanging or using that asset in a transaction.
Consequently, the details of each transaction matter. Accurate records can show what happened and make tax preparation significantly easier.
THE KEY RULE
The transaction matters.
Buying, selling and receiving crypto can have different tax results.
Keep records of dates, amounts, values, cost basis and the way you acquired or disposed of each digital asset.
TAXABLE EVENTS
When Cryptocurrency May Need to Be Reported
Several common digital asset transactions can create federal tax reporting requirements.
For that reason, taxpayers should distinguish between simply holding an asset and selling, exchanging, spending or receiving one.
01
Selling Cryptocurrency
Selling cryptocurrency that you hold as a capital asset can create a capital gain or loss. Generally, the tax result depends on the amount you receive compared with your adjusted basis in the asset.
02
Exchanging One Digital Asset for Another
Exchanging one cryptocurrency for another can also create a reportable disposition. In other words, moving from one digital asset into another does not automatically avoid a taxable event.
03
Using Crypto to Buy Something
Using a digital asset to purchase goods or services can involve a disposition as well. Therefore, taxpayers may need to determine whether they generated a gain or loss when they spent the asset.
GAINS & LOSSES
How Crypto Gains and Losses Work
For a digital asset that qualifies as a capital asset, calculating the tax result generally requires a comparison between the amount received from the disposition and the asset’s adjusted basis.
Cost Basis Matters
Cost basis plays an important role in calculating a gain or loss. Generally, basis starts with the amount paid to acquire the digital asset, although the circumstances may require adjustments.
For example, a taxpayer who sells a digital asset for more than its adjusted basis may generate a capital gain. Conversely, a sale for less than adjusted basis may generate a capital loss.
Because transactions can accumulate across multiple exchanges and wallets, complete records become particularly important.
Holding Period Matters Too
The amount of time you own a capital asset can affect the classification of a gain or loss. Generally, disposing of an asset after one year or less produces a short-term result.
By comparison, holding an asset for more than one year before the disposition generally produces a long-term capital gain or loss. Therefore, taxpayers should keep both acquisition and disposal dates in their records.
For additional information, review the IRS Digital Asset FAQs.
REPORTING
How Cryptocurrency Goes on a Tax Return
Taxpayers generally use Form 8949 to report applicable sales, exchanges and other dispositions of digital assets that they hold as capital assets.
Afterward, Schedule D summarizes the applicable capital gains and losses. This process helps organize the results of capital transactions on the federal income tax return.
However, not every digital asset transaction represents a capital transaction. For instance, cryptocurrency that someone receives as compensation for services can represent income at the time of receipt.
Therefore, correctly identifying the type of transaction is an important step before deciding where the activity belongs on the tax return.
FORMS TO KNOW
Form 8949 & Schedule D
Taxpayers generally use Form 8949 for applicable sales and other dispositions of capital assets, including applicable digital asset transactions.
Next, Schedule D summarizes capital gains and losses from those transactions.
Depending on the activity, taxpayers may also need additional forms or schedules.
For help preparing an individual return, explore our tax preparation and accounting services.
DIGITAL ASSET REPORTING
What Is Form 1099-DA?
Digital asset reporting continues to evolve. Under current reporting rules, certain brokers use Form 1099-DA, Digital Asset Proceeds From Broker Transactions, for applicable digital asset transactions.
Consequently, taxpayers may see this form alongside other tax documents associated with investment activity.
Gross Proceeds Reporting
For applicable transactions beginning in 2025, certain brokers must report gross proceeds from digital asset sales and exchanges.
Basis Reporting
In addition, certain covered digital assets have basis reporting requirements for transactions beginning in 2026. However, the information available on a form can depend on the asset and the circumstances.
Your Records Still Matter
Most importantly, a tax form does not eliminate the need for your own records. Wallet transfers, transactions across different platforms and historical purchases can make complete documentation especially valuable.
CRYPTO AS INCOME
What If You Receive Cryptocurrency as Payment?
Cryptocurrency taxes are not limited to investors. Digital assets that you receive for work or services can also create taxable income.
Payment for Services
When a taxpayer receives digital assets as payment for services, the fair market value of those assets may need to count as income.
For a self-employed individual, the payment may also represent business income. As a result, self-employment tax considerations can apply in addition to income tax.
Furthermore, the value at the time of receipt can become relevant when calculating basis for a future sale or other disposition.
Business Recordkeeping
Businesses and independent contractors that accept cryptocurrency should maintain records showing the date and value of each payment.
Good records should also distinguish business income from later changes in the asset’s value. Consequently, bookkeeping becomes particularly important when a business receives digital assets and later sells or exchanges them.
ASB Tax & Accounting also provides bookkeeping services for businesses that need help maintaining organized financial records.
BEFORE YOU FILE
Crypto Tax Records to Gather
Before preparing a return involving digital assets, organize your transaction history rather than relying on a single exchange statement.
In particular, your records should help establish acquisition dates, purchase amounts and the details of later dispositions.
Transaction History
Start by gathering records of purchases, sales, exchanges and other digital asset transactions from the platforms and wallets you used.
Cost Basis Information
Next, collect documentation that shows acquisition dates, purchase amounts and other information needed to determine adjusted basis.
Tax Forms
Additionally, gather Forms 1099-DA and any other digital asset tax documents you received. Then, compare those forms with your own transaction history before filing.
Transfers Between Wallets
Finally, identify transfers between wallets or accounts that you own. Doing so can help distinguish transfers from actual sales or exchanges when reviewing your records.
COMMON QUESTIONS
FAQ About Cryptocurrency Taxes
These answers cover several common questions taxpayers have about digital assets and federal tax reporting.
Generally, purchasing a digital asset with U.S. dollars and continuing to hold it does not by itself create a capital gain or loss. However, selling, exchanging or otherwise disposing of the asset later may have tax consequences.
An exchange of one digital asset for another can create a reportable disposition. Therefore, taxpayers may need to calculate a gain or loss even when they receive no U.S. dollars in the transaction.
A missing information form does not automatically remove a tax reporting requirement. Consequently, taxpayers should review their actual digital asset transactions and maintain their own records.
Taxpayers generally report applicable dispositions of digital assets that qualify as capital assets on Form 8949. Afterward, Schedule D summarizes the applicable capital gains and losses.
Form 1099-DA provides information about certain digital asset transactions that brokers report. However, taxpayers should still maintain their own records because one tax form may not contain every detail needed to prepare the return.
Need Help Reporting Cryptocurrency on Your Taxes?
Digital asset tax reporting can involve transaction histories, cost basis, capital gains and losses, Forms 1099-DA and activity across multiple exchanges or wallets. Therefore, organized records are especially important before preparing the return.
ASB Tax & Accounting provides tax preparation and accounting assistance for individuals and businesses in Oxnard and surrounding Ventura County communities.
In addition, assistance is available in English and Spanish.
Last reviewed: September 2026. Digital asset reporting requirements and individual circumstances can change. Therefore, this article provides general information and does not replace individualized tax advice.
