The IRS treats cryptocurrency as property, not currency. You owe tax when you sell it, trade it for another coin, or spend it. The gain is then taxed like a stock gain. Crypto you receive as pay or as staking and mining rewards is ordinary income. It is valued on the day you get it.
This guide shows what triggers tax and how to calculate a gain by hand, the way a cryptocurrency tax calculator does. It also covers the 2026 rates and the new broker forms.
What counts as a taxable event
According to the IRS digital assets page, crypto transactions must be reported even when they produce no gain. Still, not every move creates a tax bill. The table sorts the common cases.
| Action | Taxable? | Type of tax |
|---|---|---|
| Buying crypto with dollars | No | None until you dispose of it |
| Holding crypto | No | None |
| Moving coins between your own wallets | No | None |
| Selling crypto for dollars | Yes | Capital gain or loss |
| Trading one coin for another | Yes | Capital gain or loss on the coin given up |
| Spending crypto on goods or services | Yes | Capital gain or loss |
| Paying a network fee in crypto | Yes | Treated as a disposal |
| Getting paid in crypto for work | Yes | Ordinary income |
| Staking or mining rewards | Yes | Ordinary income when received |
Every Form 1040 also asks a yes-or-no digital asset question. You answer yes if you received crypto as pay or rewards, or if you sold, traded or spent any. You answer no if you only bought and held, or moved coins between your own wallets.
How to calculate crypto gains step by step
Every crypto tax calculator runs the same four steps. You can do them yourself for a handful of trades.
- Find your cost basis. This is what you paid, including fees.
- Find your amount realized. This is what you received, minus fees.
- Subtract. Amount realized minus basis equals your gain or loss.
- Check the holding period. Held one year or less means short-term. Held longer means long-term.
Here is an example. In March 2025, you buy 0.5 bitcoin for $30,000 plus a $150 fee, so your basis is $30,150. In April 2026, you sell it for $40,000 and pay a $200 fee, so you realize $39,800. Your gain is $9,650, and because you held it over a year, it is long-term.
Now assume you are single with $60,000 of other taxable income in 2026. The gain falls in the 15% long-term bracket, so federal tax is about $1,448. If you had sold in February 2026, before a full year passed, the gain would be short-term. It would then be taxed at your 22% ordinary rate, or about $2,123.
When you bought the same coin several times at different prices, the units you sell matter. The IRS lets you identify specific units if your records show which ones you sold. Otherwise, the rules generally treat the oldest units as sold first. Since January 1, 2025, basis is tracked wallet by wallet and account by account. It is no longer pooled across all your holdings.
Crypto tax rates for 2026
Short-term crypto gains are taxed at ordinary income rates, from 10% to 37% for 2026. Long-term gains use lower rates. IRS Revenue Procedure 2025-32 sets them by taxable income:
| Long-term rate | Single filers | Married filing jointly |
|---|---|---|
| 0% | Up to $49,450 | Up to $98,900 |
| 15% | $49,451 to $545,500 | $98,901 to $613,700 |
| 20% | Over $545,500 | Over $613,700 |
Higher earners may also owe the 3.8% net investment income tax once modified adjusted gross income passes $200,000 for single filers or $250,000 for joint filers. State tax applies too. California, for example, has no special capital gains rate, so it taxes crypto gains as regular income.
Staking, mining and getting paid in crypto
Crypto you earn counts as income at its fair market value when you gain control of it. That rule covers wages paid in crypto, freelance payments, mining rewards and staking rewards. The IRS confirmed the staking position in Revenue Ruling 2023-14. A 2026 Tax Court decision also treated staking rewards as income.
For instance, say staking rewards worth $500 land in your wallet. You report $500 of income for that day. That $500 also becomes your basis in those coins. If you later sell them for $700, you have a $200 capital gain on top.
Hobby-level rewards usually go on Schedule 1. However, if mining or crypto work is a business, the income goes on Schedule C, and self-employment tax may apply.
Losses, and the wash sale question
Crypto losses offset crypto and stock gains. If losses exceed gains, you can deduct up to $3,000 of the net loss against other income per year. The rest carries forward.
Under current law, the wash sale rule covers stocks and other securities but not crypto. That is because the IRS treats crypto as property. So selling a coin at a loss and buying it back soon does not, by itself, block the loss today. Spot crypto exchange-traded funds are securities, though, so the rule does apply to them.
That may change. On September 16, 2026, the House Ways and Means Committee approved the Digital Asset Tax Certainty Act, H.R. 10357, by a 38 to 5 vote, as EY’s tax news summary reports. As written, the bill would extend the wash sale rule to widely traded digital assets sold after September 14, 2026. It would also exempt network fees of $10 or less from gain or loss for most users. As of October 20, 2026, the full House and the Senate have not passed it, so it is not law.
Forms, records and tax software
Platforms that act as brokers now send Form 1099-DA. They report gross proceeds for sales from January 1, 2025. For certain sales from January 1, 2026, they also report cost basis, mostly for coins bought in the same account. You report each sale on Form 8949 and carry totals to Schedule D. Income goes on Schedule 1 or Schedule C.
Brokers often lack your basis for coins you moved in from another wallet. So keep your own records: dates, amounts, prices in dollars, fees and wallet addresses. Crypto tax software works by importing those records and transaction files, matching buys to sells, and producing Form 8949. Results are only as good as the data, so check any missing basis entries before you file. A short year-end routine also helps. Before December 31, export your full transaction history from every platform you used, since some close accounts or limit old records. Then compare the totals with any Form 1099-DA you receive in early 2027, and note the reason for any gap.
Also beware of scams. The IRS says it does not require crypto registration. It also does not mail letters with QR codes that send you to a compliance portal.
Crypto prices can swing sharply, and you can lose money even before taxes. Our explainer on whether cryptocurrency is a good investment covers those risks. This article is general information, not tax or financial advice. More money explainers are in our money and business guides.
Frequently asked questions
How does a cryptocurrency tax calculator work?
It imports your transactions and matches each sale to the coins bought. Then it subtracts basis from proceeds and sorts gains into short-term and long-term. Finally, it applies your tax brackets.
Do I pay tax if I just buy and hold crypto?
No. Buying with dollars and holding creates no tax. Tax comes when you sell, trade, spend, or receive crypto as income.
Is trading one crypto for another taxable?
Yes. Swapping coins counts as selling the first coin at its fair market value. You owe tax on any gain, even though no dollars changed hands.
Are staking rewards taxable?
Yes. The IRS treats staking rewards as ordinary income at their value when you gain control of them. That value becomes your basis for any later sale.
Have a question about this topic? Ask in the comments below. Our editors read every comment and answer questions here, and we add useful answers to the guide.
Sources
- irs.gov/filing/digital-assets
- irs.gov/businesses/small-businesses-self-employed/digital-assets
- irs.gov/individuals/international-taxpayers/frequently-asked-que…
- irs.gov/irb/2023-33_IRB
- irs.gov/pub/irs-drop/rp-25-32.pdf
- irs.gov/taxtopics/tc409
- irs.gov/taxtopics/tc559
- irs.gov/forms-pubs/about-form-8949
- ftb.ca.gov/file/personal/income-types/capital-gains-and-losses.html
- taxnews.ey.com/news/2026-1972-ways-and-means-approves-digital-assets-ta…
- congress.gov/bill/119th-congress/house-bill/10357