Crypto Tax USA: How the IRS Treats Crypto

The IRS asked one specific question at the top of Form 1040: “At any time during the year did you receive, sell, exchange, or otherwise dispose of a digital asset?” That question has been on the front page of the most-filed form in America since 2020. Lying on it is a felony. Most people don’t lie. They just don’t know what counts.

I’m not a US person but I’ve spent more time than I’d like to admit reading IRS guidance for US readers of this site, friends in the States who trade, and the family-and-friends who keep asking “do I owe tax on my MetaMask?” The short answer is yes, almost certainly, and the long answer is below.

Short answer: The IRS treats crypto as property under Notice 2014-21, which means every disposal is potentially taxable. Selling, swapping, or spending crypto is a capital gains event. Mining, staking, airdrops, and crypto received for services are ordinary income at fair market value on receipt. Disposals are reported on Form 8949 and totaled on Schedule D. From the 2025 tax year, brokers report crypto activity on the new Form 1099-DA. The vast majority of US crypto holders need to file something every year they’ve touched crypto.

I file my crypto tax with Koinly → (affiliate)

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Key takeaways

• The IRS classifies crypto as property under Notice 2014-21, settled since 2014.
• Short-term capital gains (held under 12 months) are taxed at ordinary income rates — 10% to 37% depending on bracket.
• Long-term capital gains (held 12+ months) are taxed at 0%, 15%, or 20% depending on income.
• Staking rewards are ordinary income at fair market value on receipt per Rev Rul 2023-14.
• Disposals go on Form 8949 with Schedule D as the summary. Income (mining, staking, airdrops) goes on Schedule 1.
• From the 2025 tax year, exchanges and brokers report your activity to the IRS on the new Form 1099-DA. The era of “they don’t know” is over.
• I use Koinly (affiliate) — it imports from major US-friendly platforms, handles FIFO/LIFO/Specific ID, and produces a ready-to-file Form 8949.

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Table of contents

1. Quick answer: how the IRS treats crypto
2. Capital gains: short-term vs long-term
3. What counts as a taxable event
4. The new 1099-DA reporting (effective 2025)
5. Form 8949 and Schedule D explained
6. Cost basis methods — FIFO, LIFO, Specific Identification
7. Staking income and Rev Rul 2023-14
8. DeFi, NFTs, mining, and other special cases
9. The wash sale rule (or lack of it for crypto)
10. Crypto losses and how to offset them
11. How I file with Koinly — step by step
12. Common IRS audit triggers
13. State crypto tax variations (CA, NY, TX and others)
14. Frequently asked questions

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Quick answer: how the IRS treats crypto

The IRS settled this in March 2014 with Notice 2014-21. Crypto is treated as property, not currency. That has three consequences.

One. Every disposal — selling, swapping, paying with crypto, gifting outside the annual exclusion — is a capital gains event. You compare cost basis with proceeds and recognize gain or loss.

Two. Crypto received as income — mining, staking rewards, airdrops, payment for services, crypto salary — is ordinary income at the fair market value on the date received. That fair market value becomes the cost basis for the property going forward.

Three. Crypto held as a capital asset gets capital gains treatment (short or long term). Crypto held in a trade or business gets ordinary income treatment.

The IRS reinforced this position with Rev Rul 2019-24 (hard forks and airdrops) and Rev Rul 2023-14 (staking rewards). The crypto industry has lobbied hard for different treatment. The IRS has not budged.

If you’re new to crypto and haven’t yet bought any, the how to buy crypto guide is the place to start. Just know that the moment you swap one token for another, you’ve created a taxable event.

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Capital gains: short-term vs long-term

The IRS distinguishes capital gains by holding period.

Short-term capital gains

Crypto held less than 12 months before disposal. Gains are taxed at your ordinary income rate:

Filing status / income	2025 ordinary rate
10% bracket	10%
12% bracket	12%
22% bracket	22%
24% bracket	24%
32% bracket	32%
35% bracket	35%
37% bracket	37%

If you flip coins inside 12 months, you pay your full marginal rate. For most retail traders that’s 22% or 24%.

Long-term capital gains

Crypto held 12 months or more before disposal. Preferential rates:

Filing status	Income (single)	LTCG rate
0% bracket	Up to ~$47,025	0%
15% bracket	~$47,025 – ~$518,900	15%
20% bracket	Above ~$518,900	20%

(Brackets shift slightly each year with inflation — confirm the current year’s thresholds at IRS.gov.)

The 15% long-term rate vs the 22% short-term rate is a meaningful difference. If you’ve been holding Bitcoin for over a year, selling and rebuying is expensive. Holding through the 12-month line is one of the few tax-efficient moves available to US crypto holders.

Net Investment Income Tax

If your modified adjusted gross income is over $200,000 (single) or $250,000 (joint), you also owe a 3.8% Net Investment Income Tax on top. That bumps the effective rate on long-term gains in the top bracket to 23.8%.

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What counts as a taxable event

This is where most US crypto holders accidentally under-report. The IRS list of taxable events on crypto:

Capital gains events (Form 8949 / Schedule D):
– Selling crypto for USD
– Swapping one crypto for another (ETH → SOL is a disposal of ETH)
– Paying for goods or services with crypto
– Gifting crypto above the annual gift tax exclusion ($18,000 in 2025)

Ordinary income events (Schedule 1, Schedule C if business):
– Mining rewards (income at FMV on the day received)
– Staking rewards (income at FMV when you can control them — Rev Rul 2023-14)
– Airdrops (income at FMV on receipt per Rev Rul 2019-24)
– Receiving crypto as salary or for services
– Hard forks where you receive new tokens
– Yield, interest, or rewards from CeFi platforms

Not taxable:
– Buying crypto with USD
– Transferring crypto between your own wallets (your Coinbase to your Ledger)
– Gifting crypto under the annual exclusion ($18,000 in 2025)
– Holding crypto

The “crypto-to-crypto swap is taxable” rule catches more people than any other. The IRS has been clear on it since 2014 — Notice 2014-21 explicitly says exchanges of one virtual currency for another are taxable. There is no like-kind exchange treatment for crypto (that was settled by the 2017 Tax Cuts and Jobs Act, which limited 1031 to real estate).

If you used a Ledger Nano X to swap ETH for SOL, that’s a disposal. The fact that no fiat hit your bank account doesn’t change the tax treatment.

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The new 1099-DA reporting (effective 2025)

This is the biggest change in US crypto tax in a decade.

What changed

Starting with the 2025 tax year, “digital asset brokers” — including US-friendly exchanges, custodial wallet providers, and some payment processors — must report your gross proceeds on a new form: Form 1099-DA (Digital Asset Proceeds From Broker Transactions).

For the 2026 tax year, the same brokers must also report cost basis on the 1099-DA, with rules largely tracking how stockbrokers report on Form 1099-B.

The IRS finalized these rules in 2024 after a long consultation period. The 1099-DA standardizes what was previously a patchwork of inconsistent exchange reporting (some 1099-MISC, some 1099-K, some nothing).

What this means for you

The IRS will get a 1099-DA copy directly from your broker. They already know what you sold. If what you report on Form 8949 doesn’t match what’s on the 1099-DA, you’re inviting questions. Mismatches trigger automated IRS notices (the CP2000 letter is the common one) months or years after filing.

You still need to do the work yourself. The 1099-DA reports gross proceeds. You need to subtract cost basis, sort short- vs long-term, account for wash sales (none yet on crypto — see below), and report on Form 8949. For 2026+, brokers will help by also reporting cost basis they can see — but they often can’t see cost basis if you bought the crypto somewhere else and transferred it in.

Self-custody wallets and DeFi are still on you. A 1099-DA covers activity at a US broker. If you sent BTC from a centralized exchange to your Ledger, then sent it to a decentralized exchange, then traded it for an altcoin — most of that won’t be on a 1099-DA. You’re still responsible for reporting it.

Why this matters

The IRS spent years complaining that crypto was a tax evasion problem because reporting was inconsistent. 1099-DA closes that gap. For US persons, the days of “they won’t know about my Coinbase account” are over.

Reuters reported significant IRS enforcement budget allocated to digital asset compliance in recent enforcement years. The trend line is clear: more data, more matching, more enforcement.

If you’ve been informal about crypto reporting in past years, now is the year to clean it up. The voluntary disclosure approach (paying back taxes plus interest before they come find you) is structurally better than the alternative.

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Form 8949 and Schedule D explained

This is the actual paperwork.

Form 8949 — Sales and Other Dispositions of Capital Assets

Every individual disposal goes on Form 8949. Each line:

• Description of property (e.g., “0.25 BTC”)
• Date acquired
• Date sold
• Proceeds (in USD)
• Cost basis (in USD)
• Adjustment (rare for crypto — wash sales would be here, but no rule yet)
• Gain or loss

Form 8949 has separate sections for short-term and long-term. Within each, separate boxes for:

• (A) Reported on 1099-B/1099-DA with basis reported to IRS
• (B) Reported on 1099-B/1099-DA with basis NOT reported to IRS
• (C) Not reported on a 1099 form

For 2025+, most US-broker transactions will be Box A or B. DeFi and self-custody trades will be Box C.

If you have 50 trades, you’ll fill out 50 lines. If you have 5,000 trades — you’ll attach a CSV/PDF schedule referenced on Form 8949 (“see attached statement”).

Schedule D — Capital Gains and Losses

Summary form. Totals from Form 8949 flow here. Net short-term and net long-term totals, then a final net capital gain or loss that flows to Form 1040.

If you have a net capital loss, up to $3,000 reduces your ordinary income in the current year ($1,500 if married filing separately). The rest carries forward indefinitely.

Schedule 1 — Additional Income

Ordinary income from crypto (mining, staking, airdrops not received as a trade or business) goes on Schedule 1. Line 8v specifically references digital asset rewards in the current form.

Schedule C — Profit or Loss from Business

If you mine crypto as a trade or business, or trade crypto as a trade or business (rare classification — discuss with a CPA), it goes on Schedule C, subject to self-employment tax.

The digital asset question on Form 1040

The first page of Form 1040 asks whether you received, sold, exchanged, or disposed of any digital asset during the year. You must answer yes or no. Answering no when the answer is yes is perjury. The penalty for false statements on a tax return is up to three years and $250,000.

The question is not “did you make money.” The question is “did you have any activity.” Even a $5 swap on Uniswap is a yes.

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Cost basis methods — FIFO, LIFO, Specific Identification

Unlike the UK’s mandatory share pool, the US gives you a choice.

FIFO (First In, First Out)

The default. The first crypto you bought is the first crypto you sold. Older cost basis is used first, which usually means higher gains in a rising market.

LIFO (Last In, First Out)

You can elect LIFO. The most recent crypto bought is the most recent sold. In a rising market this defers gains by using newer (higher) cost basis first.

HIFO (Highest In, First Out)

A subset of Specific Identification. You sell the highest-cost-basis units first, minimizing gains in the current year.

Specific Identification

You can identify specific units of crypto being sold, as long as you have records of cost basis and acquisition date for each unit. This is the most tax-efficient method but requires meticulous record-keeping.

To use Specific Identification, the IRS guidance requires:

• You can show the date and time each unit was acquired
• The cost basis and fair market value at acquisition
• The date and time each unit was disposed of
• The fair market value at disposal

Crypto tax software handles Specific Identification automatically and can run “what-if” calculations to show which method minimizes tax. Koinly (affiliate) lets you switch methods to compare.

Choosing once vs choosing each year

You generally choose a method and stick with it. Changing methods between years is allowed but you need to be consistent within a year and within a specific account/wallet. Recent IRS guidance (Rev Proc 2024-28) clarified that taxpayers must allocate cost basis on a wallet-by-wallet or account-by-account basis going forward, not aggregated across all wallets — a meaningful change for active multi-wallet users.

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Staking income and Rev Rul 2023-14

The IRS settled the staking question in 2023. Until then, there was a real legal argument (the Jarrett case) that staking rewards should be treated as created property — taxed only when sold, not when received. The IRS disagreed.

What Rev Rul 2023-14 says

If you stake crypto on a proof-of-stake network and receive rewards, the rewards are included in gross income in the year you gain “dominion and control” — usually the moment they’re credited to your wallet or staking account.

The fair market value on that date becomes:
– Your taxable income (ordinary, marginal rate)
– The cost basis for future disposals

Practical implications

Staking ETH directly, staking SOL, earning on BitGet Earn, earning on Coinbase staking — all the same treatment. Each reward credits income at the FMV on the credit date.

If you receive rewards multiple times a day (most staking does), you technically have to record each one separately. In practice, tax software pulls the daily snapshot of rewards and reports them as a single daily income entry.

When you later sell the staked rewards, you compare proceeds against the cost basis (the FMV when received) and recognize gain or loss. So staking creates two tax events per token: income on receipt, capital gains on disposal.

The crypto staking explained guide covers how staking works mechanically. The tax treatment is the same regardless of which chain.

CeFi vs DeFi staking

The Rev Rul treatment applies to both. Whether you stake through Coinbase, a validator you run yourself, or a DeFi protocol like Lido — the tax treatment is the same.

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DeFi, NFTs, mining, and other special cases

DeFi yield, LP positions, lending

DeFi is the area where rules are most unsettled in the US, just as in the UK.

• Lending crypto on Aave / Compound: yield is ordinary income at FMV on accrual or receipt.
• Liquidity pool deposits: arguably a taxable swap of your tokens for an LP token. Conservative treatment: it’s a disposal of the deposited tokens. Aggressive treatment: it’s a non-recognition event. Discuss with a CPA — there’s no clear IRS ruling on this yet.
• Yield farming rewards: income on receipt at FMV.
• Bridging: usually not a disposal if the same beneficial ownership is preserved, but some bridges burn and mint, which technically is.

If you actually use DeFi materially, the yield farming explained post covers the mechanics. The tax position is messier than the mechanics.

NFTs

NFTs are crypto for tax purposes. Disposals are capital gains, holding period applies.

A wrinkle: the IRS has discussed treating NFTs as “collectibles” for some purposes, which would tax long-term gains at up to 28% instead of 0/15/20%. Not finalized but worth tracking.

Creating and selling NFTs as an artist is generally ordinary income (Schedule C). Buying and flipping NFTs is generally capital gains.

Mining

Mining as a hobby: ordinary income at FMV on receipt, reported on Schedule 1.

Mining as a business: Schedule C, subject to self-employment tax (15.3% on top of income tax), but you can deduct electricity, hardware depreciation, and other business expenses.

The line between hobby and business is fuzzy — IRS guidance looks at frequency, sophistication, profit motive, and whether the activity is operated in a business-like manner.

Hard forks and airdrops

Rev Rul 2019-24 settled this: if a hard fork results in you receiving new tokens that you have dominion and control over, the value of those tokens is ordinary income on receipt.

Airdrops follow the same rule. Whether claimed actively (Arbitrum-style) or passively (UNI-style snapshot), the receipt at FMV is income.

Lost or stolen crypto

The Tax Cuts and Jobs Act largely eliminated the casualty/theft loss deduction for personal use property through 2025 (extended in subsequent legislation). For most retail crypto users this means a stolen wallet doesn’t produce a deductible loss. Sad but true.

Investment property might still qualify under specific circumstances — discuss with a CPA.

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The wash sale rule (or lack of it for crypto)

This is one area where US crypto traders have a structural advantage over UK traders.

What a wash sale is

A wash sale is when you sell a security at a loss and buy back substantially identical security within 30 days before or after. The IRS disallows the loss for the current year and adds it to the cost basis of the replacement security.

The wash sale rule applies to stocks and securities. The current IRC §1091 definition of “stock or securities” does not include crypto. So as of now, you can sell crypto at a loss, immediately rebuy the same asset, and still claim the loss.

Tax-loss harvesting

This makes crypto loss harvesting much more tax-efficient than stock loss harvesting. If BTC is down 30% from your cost basis, you can:

1. Sell BTC at a loss
2. Realize the capital loss for tax
3. Immediately rebuy BTC at the same price
4. Reset your cost basis to the lower price

You’ve crystallized a tax deduction without losing exposure. In the UK, the 30-day bed-and-breakfast rule blocks this entirely.

The cliff

Congress has considered closing this loophole multiple times. Several proposals in recent legislative sessions would have extended the wash sale rule to digital assets. None have passed yet — but they could in any tax year, possibly retroactive to the start of that year.

If you tax-loss-harvest aggressively, watch the legislative calendar. The rule could change with little notice.

What to actually do

Most retail traders should harvest losses in December if they have any. The math is simple: a loss now reduces your tax bill now. Even if you immediately rebuy, you’ve moved cost basis to current prices.

Koinly (affiliate) has a tax-loss-harvesting view that highlights unrealized losses sitting in your portfolio. Worth a look before December 31 every year.

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Crypto losses and how to offset them

Net capital losses work like any other capital losses:

• Up to $3,000 of net capital loss offsets ordinary income each year ($1,500 if married filing separately)
• The rest carries forward indefinitely until used
• Capital losses can fully offset capital gains in the same year (no $3,000 cap when offsetting gains)

Worst case: you lost crypto to a hack or rug pull

For tax years 2018 through at least 2025, personal-use property casualty/theft losses are not deductible. That includes crypto held personally.

The narrow exceptions:
– Crypto held for investment in a federally declared disaster area (rare)
– Crypto held as inventory or trading property (a business deduction)
– Crypto held by a separate entity (LLC, partnership) where the activity rises to a trade or business

If you lost crypto to a rug pull, you may still be able to claim a worthless security deduction by abandoning the position (sending the tokens to a burn address or formally writing them off). The IRS guidance on this is sparse — talk to a CPA.

Worthless tokens

A token that has gone to zero with no realistic recovery (think Terra LUNA, FTT) can be abandoned for tax purposes. You file as if you sold the tokens for $0 and claim the loss. Practical method: send the tokens to a burn address and screenshot the transaction.

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How I file with Koinly — step by step

This is the practical workflow. Same engine for US filing as UK filing, different output report.

Step 1: Pull all data sources

For the calendar tax year (US tax year = calendar year, ending December 31), I gather:

• Coinbase, Kraken, Gemini: full account exports — every spot, futures, staking event.
• BitGet exports (if you’re a non-US reader using BitGet — irrelevant for US persons since BitGet is geo-blocked).
• Ledger Live: per-account export of operations.
• MetaMask and other browser wallets: Etherscan-style export for each address.
• DeFi protocols: where possible, direct export; otherwise via wallet address.

US-friendly platforms: Coinbase, Kraken, Gemini, Crypto.com, Robinhood, and Cash App. The Form 1099-DA you receive from these covers a chunk of the work but you still need to fill in self-custody and DeFi activity yourself.

Step 2: Connect to Koinly

Open Koinly (affiliate). Set country: United States. Tax year: the calendar year you’re filing for.

For each platform, either connect by API or upload CSV. I prefer CSV — it doesn’t miss edge cases like staking rewards that the API sometimes drops.

Step 3: Choose your cost basis method

In the Koinly settings, pick FIFO, LIFO, HIFO, or Specific Identification.

I’d suggest running the report under FIFO first (the default), then under HIFO, and seeing the tax difference. For some traders the savings from HIFO are several thousand dollars. For others, it’s a wash.

Note: from recent IRS guidance, you should be allocating cost basis wallet-by-wallet rather than across your entire portfolio. Koinly handles this if you mark wallets correctly.

Step 4: Review auto-classification

Koinly classifies each transaction as a trade, deposit, withdrawal, transfer, mining, staking, airdrop, etc. About 95% is correct out of the box. The 5% I always check:

• Transfers between my own wallets that Koinly flagged as disposals.
• Airdrops — what was the FMV on receipt? Some Koinly pulls are stale.
• Staking rewards — make sure none are missing (the API is sometimes incomplete for staking).
• Failed transactions that produced gas fees but no value transfer.
• Lost or stolen tokens — mark them with the right tag.

Step 5: Resolve missing cost basis

Koinly will flag any disposal where it can’t trace the cost basis. Typical cause: an old exchange you forgot to import.

Either find the missing data or accept zero cost basis (paying tax on 100% of proceeds as gain). For tiny old positions, zero basis is often easier than chasing 2021 history.

Step 6: Generate the IRS reports

Generate the United States report bundle. You’ll get:

• Form 8949 with every disposal, sorted by short-term and long-term
• Schedule D summary
• Income summary for Schedule 1 (mining, staking, airdrops, hard forks)
• Year-end portfolio statement as your record

You can import Form 8949 directly into TurboTax, H&R Block, or hand it to your CPA. The integration with TurboTax is the cleanest of the consumer tax tools.

Step 7: File

Either you handle it (TurboTax / H&R Block / Free File depending on income), or your CPA does it from the Koinly outputs.

Federal deadline is April 15 (with extensions to October 15). Payment is due April 15 regardless of extension.

If you owe more than $1,000 of crypto tax for the year, you may also need to pay quarterly estimated taxes throughout the year to avoid underpayment penalties.

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Common IRS audit triggers

These are the patterns the IRS looks for when deciding what to audit. Avoid them where you can.

Mismatched 1099-DA reporting

Starting with 2025, brokers report on 1099-DA. If your Form 8949 totals don’t tie to the 1099-DA the IRS already has, you’ll get an automated notice. Not always an audit — sometimes just a CP2000 “this doesn’t match” letter — but it’s a flag.

Large income with “no” on the digital asset question

If your bank deposits show fiat from Coinbase but your 1040 says no to the digital asset question, that’s the easiest audit in IRS history.

Massive gains with no documented cost basis

If you report $200,000 of crypto disposals on Form 8949 with $0 cost basis on every line, the IRS notices. Same goes for very small cost bases that look like you didn’t bother to look them up.

Pattern of reporting losses every year

Capital losses are normal. Capital losses every year for five years on a hobby activity start to look like the activity isn’t really an investment activity. The IRS can reclassify it.

High-volume DeFi activity not reported

If you have a wallet with 5,000 transactions on Etherscan and you reported 12 trades, that’s an obvious gap. The IRS does pull on-chain data for compliance purposes.

Cold-storage transfers misclassified as disposals

The opposite mistake — reporting your own-wallet transfers as taxable disposals — overstates your tax bill. Less of an audit risk but a costly error.

Failure to report staking, mining, or airdrop income

This is the most common error. Income-side reporting is often where retail traders miss things. The 1099-DA does not capture every income event — staking on a non-US platform, DeFi yield, and airdrops are often invisible to brokers. You’re still responsible.

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State crypto tax variations

Federal is one layer. Your state is the second.

California

California treats crypto as property, same as federal. State capital gains are taxed at California’s ordinary income rate (up to 13.3% — the highest state income tax in the US). Long-term federal preferential rates do not apply at the state level.

A material crypto trader in California can face combined federal + state effective rates of 37.1% on short-term gains and 33.3% on long-term gains. Worth budgeting for.

New York

Same property treatment, state ordinary income rates up to 10.9% (plus New York City another ~3.876% if you live there). Same lack of preferential long-term treatment at the state level.

NY also requires a BitLicense for crypto businesses operating in the state. Affects what platforms you can use (some exchanges don’t serve NY users) but doesn’t change individual tax treatment.

Texas

No state income tax. Federal capital gains apply but you owe Texas nothing on top. Same for Florida, Nevada, Wyoming, Washington, South Dakota, Tennessee, and New Hampshire (limited).

If you can choose where you live and you trade significantly, the tax difference is meaningful. A trader earning $200,000 of crypto gains in California vs Texas faces a state-tax gap of roughly $20,000+.

Other notable states

• Wyoming has friendly crypto-business law and no state income tax — a recent migration destination for crypto natives.
• New Hampshire has no broad income tax but does tax interest and dividends. Crypto capital gains generally escape state tax.
• Washington has no income tax but does have a capital gains tax on certain assets — crypto status under that tax is evolving.

State rules change. Always check the current treatment in the state where you’re a tax resident for the year.

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A note on stablecoins and tax

USDT, USDC, DAI — all crypto for IRS purposes. Same treatment as any other token.

• Buying USDC with USD: not a taxable event (you bought an asset).
• Swapping USDC for USDT: technically a taxable event, but with gain/loss usually near zero.
• USDC to USD: technically a disposal of USDC.
• Earning yield on USDC (on a CeFi platform or DeFi protocol): ordinary income on receipt.

In practice, retail USDC trading produces tiny gains and losses because the stablecoin price stays near $1. But every event must be reported. Software handles it. Manual tracking does not.

For the difference between the two main stablecoins, USDT vs USDC covers the trade-offs. Tax treatment is identical.

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Self-custody and the audit defense story

The most common mistake I see US traders make: they treat self-custody as somehow “off the books.”

It isn’t. The IRS can pull on-chain data. Every transaction on Bitcoin, Ethereum, Solana, or any public chain is permanently visible. Chainalysis and similar firms exist specifically to help governments do address-clustering and identify owners.

The audit defense story for self-custody is good record-keeping. If every transaction on your Ledger wallet has a documented context (you bought 0.1 ETH on Coinbase, withdrew it to your Ledger, swapped it to SOL on Uniswap, sold it back to ETH a month later, returned it to Coinbase), you can defend it.

The audit defense story for “I don’t know where these coins came from” is much worse.

If you’re using self-custody, the how to store crypto safely guide covers the security side. The tax side: every transaction needs a CSV or on-chain reference.

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A real-world workflow if you’ve been informal about it

Say you’ve been trading for three years and never properly reported. You opened Coinbase, did some swaps, sent some BTC to a Ledger, played with DeFi, forgot about a MetaMask. What do you actually do?

Step 1: Stop the bleeding

Don’t make new informal trades. Today is the first day you do this properly.

Step 2: Reconstruct what you can

Pull every CSV from every platform you’ve used. Pull Etherscan history for every Ethereum address you control. Pull Solscan for Solana addresses. Pull blockchain.com history for Bitcoin addresses.

Step 3: Import everything into Koinly

Koinly (affiliate) will let you import historical data back to your earliest transaction. Go all the way back.

Step 4: Generate reports for each open year

The federal statute of limitations is generally 3 years for normal cases, 6 years if you under-reported income by more than 25%. If you’ve never reported, every open year needs a return or amended return.

Step 5: Talk to a CPA who specializes in crypto

You’re probably going to file amended returns for past years and pay back taxes plus interest. A CPA who’s done this for crypto clients before will know whether you qualify for any voluntary disclosure programs that reduce penalties.

The cost of cleaning up voluntarily is always less than the cost of being caught. Always.

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Frequently asked questions

Do I have to pay tax on crypto in the US?

Yes, in almost all cases. The IRS treats crypto as property under Notice 2014-21. Every disposal is potentially taxable as a capital gain or loss. Mining, staking rewards, airdrops, and crypto received for services are ordinary income at fair market value on receipt.

Is buying crypto with USD taxable?

No. Buying crypto with USD is an acquisition, not a disposal. It establishes cost basis for future disposals but does not trigger tax.

Is swapping one crypto for another taxable?

Yes. Notice 2014-21 makes clear that exchanging one virtual currency for another is a disposal of the first currency. ETH → SOL is a taxable event even if no USD touches your bank account.

What is Form 8949 and do I need to file it?

Form 8949 reports each disposal of a capital asset, including crypto. Every sale, swap, or spend of crypto goes on a line. Totals flow to Schedule D. If you had any crypto disposals during the year, you need to file Form 8949.

What is the 1099-DA and when does it apply?

The Form 1099-DA is a new IRS form that brokers (including major US exchanges) use to report your gross proceeds from digital asset transactions. It applies for the 2025 tax year onward, with cost basis reporting added in 2026.

Are staking rewards taxable in the US?

Yes. Rev Rul 2023-14 confirmed staking rewards are ordinary income at fair market value on the day you gain dominion and control over them. They’re then taxed again as capital gain or loss when you eventually dispose of them.

Is there a wash sale rule for crypto in the US?

Not currently. The wash sale rule (IRC §1091) applies to “stock or securities” and the IRS has not extended it to crypto. You can sell crypto at a loss and rebuy immediately — the loss is still recognized. This may change in future legislation.

How does the IRS know about my crypto?

Multiple sources: 1099 forms from US brokers (1099-MISC, 1099-K, and now 1099-DA), bank deposit records, on-chain analysis tools, and information-sharing with foreign tax authorities. The 2026+ 1099-DA reporting closes most of the visibility gap.

What if I forgot to report crypto in previous years?

File amended returns (Form 1040-X). Pay back taxes plus interest. If the amounts are material, talk to a CPA about whether any voluntary disclosure procedures apply. Coming forward voluntarily produces significantly lower penalties than being caught.

Are NFTs taxed differently than other crypto?

Mostly the same — buying with crypto is a disposal of the crypto, selling for crypto is a disposal of the NFT, holding period determines short vs long-term. The IRS has discussed treating NFTs as collectibles for some purposes (which would tax long-term gains at up to 28%) but this is not finalized.

What’s the deadline for crypto tax in the US?

April 15 of the year following the tax year (calendar year basis). October 15 with automatic extension to file, but payment is still due April 15. State deadlines often track federal but check your state.

Can I deduct crypto losses?

Yes. Net capital losses fully offset capital gains in the same year. Up to $3,000 of additional net loss reduces ordinary income each year ($1,500 if married filing separately). Excess carries forward indefinitely.

Can the IRS audit my self-custody wallet?

Yes. On-chain data is publicly visible and the IRS uses chain analysis firms. If your wallet activity doesn’t match your reporting, you can be assessed. Self-custody is not invisible.

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A note on hardware wallets and US compliance

US readers can’t use BitGet (it’s geo-blocked). But hardware wallets work everywhere. If you’re holding crypto long-term and want it off exchange custody, a Ledger Nano X is the option I recommend.

From a tax perspective, moving crypto from an exchange to your own Ledger is not a taxable event. It’s an own-to-own transfer. But it does start mattering for record-keeping — every transaction from the Ledger needs its own tracking. The how to store crypto safely guide covers the security side.

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Final word

US crypto tax is unforgiving but the rules are clear. Property treatment. Form 8949 for disposals. Ordinary income for staking, mining, and airdrops. The new 1099-DA closes the loop on visibility.

If I were a US person starting today, this is the order I’d do it in:

1. Open a Koinly (affiliate) account on day one of any meaningful crypto activity.
2. Connect every exchange and wallet as you create them.
3. Choose a cost basis method (Specific Identification or HIFO if you want to minimize tax; FIFO if you want simplicity).
4. Set aside ~30% of every realized gain in a separate stablecoin or USD account.
5. File quarterly estimated payments if your crypto gains are material.
6. File the annual return in February or March, not the night of April 14.
7. Use a CPA the first year you do anything meaningful in DeFi.

If you’re behind, voluntary disclosure is the right move. The IRS treats people who come forward very differently from people they have to come find.

That’s the short version.

Right — over to you.

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Related posts

• Crypto Tax UK: How HMRC Treats Crypto
• How to Cash Out Crypto: Off-Ramps Without Losing Half to Fees
• How to Store Crypto Safely: The Self-Custody Guide

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