How bitcoin is taxed: selling, spending, earning and the new Form 1099-DA

What’s taxable and what isn’t

What you do	Tax consequence
Buy crypto with dollars	None
Hold it	None
Move it between your own wallets or accounts	None (a fee paid in crypto can be a small sale)
Sell it for dollars	Capital gain or loss
Trade it for another crypto	Capital gain or loss
Spend it on goods or services	Capital gain or loss
Get paid in crypto for work	Ordinary income, at its value when received
Receive mining or staking rewards	Ordinary income, when you gain control of them
Receive crypto as a gift	None until you sell it
Donate it to charity	Generally none; you may get a deduction

How gains are calculated

Your gain or loss is what you received minus your cost basis, which is what you paid for the crypto plus fees. How long you held it decides the rate:

• One year or less: a short-term gain, taxed as ordinary income.
• More than one year: a long-term gain, taxed at 0%, 15% or 20% depending on your income, plus the 3.8% net investment income tax for some higher earners.

For example, if you bought 0.1 bitcoin for $6,000 in 2024 and sold it for $8,400 in 2026, you’d have a $2,400 long-term gain.

Losses offset gains. If your losses are larger, you can deduct up to $3,000 a year against other income ($1,500 if you’re married and file separately) and carry the rest forward. Under current law, the wash sale rule blocks a loss on stock or securities sold and bought back within 30 days. Bitcoin itself isn’t a stock or a security, so the rule generally isn’t applied to it. Shares of a bitcoin ETF are securities, though, and some other tokens could be treated as securities, so check before counting on it. Members of Congress have proposed changing that, including in the PARITY Act reintroduced in 2026, but as of the summer of 2026 no change had become law.

Income from crypto

• Pay for work. If an employer or client pays you in crypto, it’s wages or self-employment income at its dollar value when you receive it.
• Mining. Rewards are income when you receive them. If you mine as a business, self-employment tax applies too.
• Staking. Under Revenue Ruling 2023-14, staking rewards are income when you gain the ability to sell or transfer them.
• Airdrops. New tokens you receive are generally income once you control them.

The value you report as income becomes your cost basis. When you later sell, you have a gain or loss from that point.

The new Form 1099-DA

Starting with sales on or after January 1, 2025, U.S. crypto brokers, such as exchanges that hold your crypto, report your gross proceeds to the IRS and to you on Form 1099-DA. From 2026 they also report cost basis for covered sales, which generally means crypto you bought in 2026 or later and kept at the same broker. If you move crypto from one broker to another, it may no longer count as covered, and then its basis isn’t reported. The rules currently cover brokers that hold customers’ crypto; transactions in your own wallet or on decentralized platforms aren’t reported this way, but they’re still taxable.

A related change took effect on January 1, 2025: you now track your cost basis separately for each wallet or account, instead of across all your holdings at once.

Reporting it on your return

• The digital asset question. Form 1040 asks whether you received, sold, exchanged or otherwise disposed of a digital asset during the year. Answer it accurately.
• Sales and trades go on Form 8949 and Schedule D.
• Income paid as wages is reported by your employer on Form W-2 and goes on the wage line of Form 1040. Other crypto income, such as staking rewards, generally goes on Schedule 1, or on Schedule C if it comes from a business.

Records to keep

For every purchase, sale, trade and payment, keep the date, the amount, the dollar value, any fees and the wallet or account involved. Exchange statements help, but they won’t cover everything, especially transfers between platforms. Crypto tax software can pull transactions together, and a tax professional who knows crypto is worth consulting if your activity is complicated.

Crypto in retirement accounts

Buying and selling spot bitcoin ETFs inside an IRA or 401(k) doesn’t create taxable gains each year; the usual retirement-account rules apply when you withdraw. Our guide to Bitcoin IRAs covers the options. For buying and storing crypto, see how to buy bitcoin safely, and for how bitcoin compares with gold, bitcoin vs. gold.

Frequently asked questions