CRYPTO GUIDANCE INC.

Kansas City, MO

How Crypto Taxes Actually Work in the U.S.

Based on IRS guidance including Notice 2014-21 and the IRS Digital Assets hub. This is education, not tax advice. For your specific situation, talk to a CPA.

The One Rule Everything Flows From

The IRS decided in 2014 that crypto is property, not currency. Every tax consequence follows from that single choice. When you sell property for more than you paid, you have a capital gain. When you sell for less, a capital loss. Your Bitcoin is taxed more like a share of stock than like the dollars in your wallet.

What Triggers a Tax Bill (Taxable Events)

Selling crypto for dollars. The obvious one.
Trading one crypto for another. Swapping BTC for ETH is a sale of your BTC at its market value that moment. Yes, really.
Spending crypto. Buying a $6 coffee with Bitcoin is technically selling that Bitcoin first. If it appreciated since you bought it, there's a gain on your coffee.
Getting paid in crypto. Ordinary income at fair market value when received.
Mining and staking rewards. Ordinary income at the value when you gain control of the coins (Rev. Rul. 2023-14). If you later sell them, that's a second, separate capital gain or loss.
Airdrops from hard forks. Income when received (Rev. Rul. 2019-24).

What Does NOT Trigger Tax

Buying crypto with dollars and holding it. Unrealized gains are not taxed.
Moving crypto between your own wallets. Exchange to hardware wallet, wallet to wallet. Not a sale.
Donating crypto to charity. Generally no capital gain, and possibly a deduction.
Gifting (within the annual gift limits). The recipient inherits your cost basis.

Short-Term vs. Long-Term: The Biggest Lever You Control

Hold an asset one year or less before selling and gains are taxed as ordinary income, up to 37% federally. Hold it more than one year and you get long-term capital gains rates: 0%, 15%, or 20% depending on your income. For most middle-class filers the long-term rate is 15%, and if your taxable income is low enough, it's zero. Patience is the cheapest tax shelter in America. Estimate your own numbers with our Crypto Tax Estimator.

Losses Are Worth Money

Capital losses offset capital gains dollar for dollar, then up to $3,000 of ordinary income per year, and anything left carries forward to future years. One quirk in your favor: the wash sale rule currently does not apply to crypto (it covers securities). Selling at a loss and rebuying quickly can harvest a deductible loss. Congress has proposed closing this. Confirm the current rule with your CPA before relying on it.

The Paperwork: What's Changed

Form 1040 asks every filer the digital asset question. Answer honestly. Buying and holding with dollars still lets you check "No."
Form 1099-DA: starting with tax year 2025, U.S. exchanges report your gross proceeds to the IRS, and cost basis reporting follows for 2026. The era of "they'll never know" is over.
Form 8949 + Schedule D: where your sales and gains actually get reported.
Per-wallet basis tracking (Rev. Proc. 2024-28): since January 1, 2025, cost basis is tracked per account or wallet, not averaged across everything you own.

Record-Keeping That Saves You Money

For every purchase, note the date, amount, and price paid (your cost basis). For every disposal, the date and proceeds. Exchanges lose history, shut down, and mis-report. Export your transaction history at least once a year and keep your own copy. Crypto tax software (Koinly, CoinTracker, CoinLedger) can reconstruct most of it, but the earlier you start keeping records, the less painful April becomes.

The One-Sentence Version

Crypto is taxed like property: swaps, spends, and sales are taxable; holding more than a year cuts your rate dramatically; losses are deductible; and as of 2025 the IRS receives your exchange activity directly, so keep records and report it right.

Original sources: IRS Digital Assets · Notice 2014-21 (PDF) · Rev. Rul. 2019-24 (PDF) · IRS Virtual Currency FAQ

Back to Resource Library · Return to Official Home Page