Taxable events
Selling crypto for USD, trading one crypto for another, spending crypto on goods or services, receiving crypto as payment for work, earning staking rewards, receiving airdrops, and mining are all taxable events. Holding alone is not.
Short-term vs long-term
Held one year or less: short-term, taxed at ordinary income rates. Held more than one year: long-term, taxed at 0%, 15%, or 20% capital gains rates.
Cost basis methods
FIFO is the default. Specific identification is allowed if you can document which units you sold (most crypto accounting software tracks this). Average cost is NOT allowed for crypto.
Staking and mining
Staking rewards are ordinary income at FMV on receipt. The Jarrett case is ongoing but the IRS's current position is taxable-on-receipt. Mining is self-employment income if operated as a trade or business.
No wash-sale rule (yet)
Stock wash-sale rules don't currently apply to crypto. You can sell at a loss and repurchase immediately, unlike stocks. Congress has proposed closing this loophole multiple times.
2025: 1099-DA arrives
Brokers must now report crypto transactions on Form 1099-DA. Coinbase, Kraken, Gemini, and similar will issue these starting with 2025 tax year. DeFi and self-custody still require your own records.
Common questions
- Do I need to report crypto I haven't sold?
- Not the holding itself. But you still answer 'yes' to the crypto question on 1040 if you bought, sold, traded, or received any crypto during the year.
- How do I track cost basis across multiple wallets and exchanges?
- Crypto tax software (Koinly, CoinTracker, TaxBit). For active traders, reconciling across platforms is most of the work.