How Is Cryptocurrency Taxed in the US? (2026 Guide)

In the United States, the IRS treats cryptocurrency as property, not currency. That single fact drives almost everything about how it's taxed: two different taxes can apply to your crypto activity — capital gains tax when you dispose of crypto, and ordinary income tax when you earn it.

Capital gains: when you dispose of crypto

A "disposal" is any time you part with a crypto asset. The most common disposals are:

• Selling crypto for dollars.
• Swapping one crypto for another (for example, ETH → USDC). Yes — a crypto-to-crypto trade is a taxable disposal.
• Spending crypto to buy goods or services, including with a crypto debit card.

Your gain or loss is simply proceeds − cost basis. Cost basis is what you originally paid for the asset (including fees). If you bought 1 ETH for $1,500 and later swapped it when it was worth $2,500, you have a $1,000 capital gain — even though you never touched dollars.

Short-term vs. long-term

Holding period matters. If you held the asset for one year or less, the gain is short-term and taxed at your ordinary income rate. Held for more than a year, it's long-term and taxed at lower capital-gains rates. This is why holding period is one of the biggest levers in crypto tax strategy.

Ordinary income: when you earn crypto

Some crypto is taxed as income at its fair market value on the day you receive it. Common examples:

• Staking rewards — see how staking rewards are taxed.
• Airdrops and promotional rewards.
• Interest and lending yield.
• Mining rewards.

Income-taxed crypto also gets a cost basis equal to that fair market value — so when you later sell it, you only pay capital gains on the change in value after you received it.

What is NOT taxable

• Buying crypto with dollars and holding it. There's no tax until you dispose of it.
• Holding — unrealized gains are not taxed.
• Transferring between your own wallets — moving crypto from an exchange to your own hardware wallet is not a disposal.

Cost basis and accounting methods

When you sell part of a position you bought at different times, which "lot" did you sell? The accounting method decides. FIFO (first-in, first-out) is the default; LIFO and HIFO are alternatives that can change your bill. Note that for 2025 and later, the IRS expects cost basis to be tracked per wallet/account rather than universally — a change many people miss.

The forms you file

• Form 8949 — lists every disposal (proceeds, cost basis, gain/loss).
• Schedule D — summarizes your total capital gains and losses.
• Schedule 1 — reports crypto income like staking and airdrops.

This article is general information, not tax advice. Consult a qualified professional about your specific situation.