This is general background knowledge (not a live fact-checked figure), but here's the standard picture of how the IRS treats crypto in the United States:
Crypto is property, not currency
The IRS has treated digital assets as property since 2014 (IRS Notice 2014-21). That means every crypto transaction is treated like a stock or real-estate trade, not like spending dollars.
When you owe tax
Taxable events — report each one and compute gain/loss:
- Selling crypto for fiat (USD)
- Trading one crypto for another (e.g. BTC → ETH) — even though no cash changes hands, it's a taxable disposal of the coin you gave up
- Spending crypto on goods or services (taxed as if you sold it at that moment)
- Earning crypto — mining rewards, staking rewards, airdrops, and crypto paid as salary/income are all taxed as ordinary income at their fair market value when received
Not taxable:
- Buying crypto with fiat (no gain yet)
- Holding it (mere appreciation isn't taxed until you dispose)
- Transferring between wallets you own (a move, not a sale — though the cost basis moves with it)
Long-term vs short-term (capital gains)
Same brackets as other assets:
- Held ≤ 1 year → short-term, taxed as ordinary income (up to 37% federal)
- Held > 1 year → long-term, taxed at lower capital-gains rates (0%, 15%, or 20% depending on income)
Reporting
You report on Form 8949 (each individual sale/trade with cost basis and proceeds) and aggregate on Schedule D. Income from mining/staking/airdrops goes on Schedule C or "Other income," and you may also owe self-employment tax on mining.
Key complications
- Cost basis method matters — the IRS defaults to FIFO (first-in, first-out) unless you elect a specific identification method, which can materially change your gains.
- Wash-sale rules don't apply (yet) — unlike stocks, you can't currently deduct a loss and immediately rebuy without a penalty. This may change if pending legislation passes.
- State taxes add on top of federal.
- DeFi & airdrops are murky — the IRS hasn't given clear guidance on every transaction type (lending yields, LP rewards, bridge activity), so the "safe" approach is to report every disposal.
Practical takeaway: a good crypto tax tool (Koinly, CoinTracker, TaxBit, etc.) that syncs your wallets and auto-computes FIFO/specific-ID basis is the standard way people stay compliant. This isn't financial or tax advice — I'm laying out the general rules so you can decide what fits your situation. Want me to look up anything specific, like a current price, a coin's tax-related news, or how a particular exchange reports gains?