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For U.S. federal income tax purposes, the IRS treats cryptocurrency and other digital assets as property. Selling crypto for dollars, swapping it for another asset, or spending it can create a taxable gain or loss; receiving digital assets can instead create income, depending on the circumstances. A Form 1099-DA may help document a transaction, but it is not a complete tax record—and for 2025 transactions it will often omit basis.
This guide covers federal rules for individual investors as of October 7, 2026. State, local, and non-U.S. tax treatment can differ. Check the IRS forms and instructions for the tax year you are filing, since those materials can change.
What counts as a taxable crypto transaction?
The IRS applies general property tax principles to digital assets. For an investor, the key distinction is whether you disposed of an asset you owned or received an asset that may count as income.
| Activity | Usual federal tax question |
|---|---|
| Sell crypto for U.S. dollars | Calculate any gain or loss by comparing amount realized with adjusted basis. |
| Exchange one digital asset for another | An exchange can be a disposition of the asset you gave up, so determine its amount realized and basis. |
| Use crypto to pay for property or services | The payment can be a disposition; determine the value received and basis of the crypto spent. |
| Receive digital assets as payment or a reward | The receipt may be ordinary income, depending on the circumstances and applicable rules. |
| Move crypto between wallets you own | This differs from a sale or exchange. Reconcile the transfer and keep records showing that both wallets are yours; the IRS says fees for transfers between your own wallets are not disposition transaction costs in the cited FAQ. |
| Hold crypto without a listed receipt or disposition | Holding alone is not the same as selling, exchanging, spending, or receiving a reward or payment. |
Do not assume every on-chain movement is taxable—or that calling a transaction a transfer makes it nontaxable. The transaction’s facts matter, particularly when assets move through intermediaries, protocols, or accounts that are not clearly under the same taxpayer’s control.
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How do I calculate a crypto gain or loss?
For a sale, the basic calculation is amount realized minus adjusted basis. If the result is positive, it is a gain; if negative, it is a loss. The calculation must account for qualifying transaction costs rather than treating the gross sale price as the entire answer.
Amount realized
For a sale for dollars, amount realized generally starts with the cash received. It can also include the fair market value of services received to effect the sale, and is reduced by qualifying costs allocable to that disposition. IRS examples of transaction costs include transaction or gas fees, transfer taxes, and commissions. A fee associated with moving assets between your own wallets is not treated as a disposition transaction cost in the IRS FAQ cited here.
Adjusted basis
For purchased virtual currency, IRS FAQ guidance describes basis as the amount spent to acquire it, including acquisition fees, commissions, and other acquisition costs measured in U.S. dollars. Adjusted basis reflects any applicable adjustments. Preserve the records used to establish both the acquisition amount and any later adjustment.
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A simple example
Suppose an investor bought crypto for $10,000, including acquisition costs, then sold it for $15,000 and paid a $100 qualifying sale commission. The amount realized after that sale cost is $14,900; subtracting the $10,000 basis gives a $4,900 gain. This is an illustration of the arithmetic, not a determination for a particular transaction: the actual result depends on the transaction details, records, and applicable current rules.
How do I establish and keep crypto basis records?
Basis must be tied to the units disposed of, not simply inferred from a wallet’s current balance or the proceeds on a broker statement. IRS guidance describes specific-unit identification as depending on adequate records identifying the units or the relevant transaction information for units in a particular account, wallet, or address. Apply the identification rules in effect for the filing year; do not assume you can choose units retroactively just to produce a preferred tax result.
Investors often hold assets across more than one exchange, wallet, or account. The IRS advises reconciling that activity, using an appropriate basis method, and accurately categorizing income events. A practical record set includes:
- Exchange statements and wallet transaction history, with transaction IDs where available.
- Acquisition and disposition dates, quantities, and U.S.-dollar values.
- Acquisition costs and disposition fees, identified separately.
- Records linking transfers between accounts or wallets you control, so a transfer is not mistaken for a sale or counted twice.
- Supporting records for receipts that may be income, such as payment or reward documentation.
Reconcile the complete history before filing. If an acquisition record or basis figure is missing, investigate it rather than treating the broker’s proceeds figure as basis. The IRS also cautions tax professionals to ensure software data is complete and accurate; that is general recordkeeping guidance, not an endorsement of a particular product.
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What is Form 1099-DA, and will it show my cost basis?
Form 1099-DA is a broker information return for reportable digital asset proceeds and, in some cases, basis. Broker reporting for relevant transactions began with transactions on or after January 1, 2025. For 2025 transactions, the IRS says most statements will not include basis, so taxpayers must establish basis from their own records to determine gain or loss. Brokers must furnish 2025 statements by February 17, 2026, according to the IRS Tax Tip dated January 28, 2026.
For transactions after 2025, the IRS’s 2026 instructions describe mandatory gross-proceeds reporting and mandatory basis reporting for covered digital assets, with voluntary basis reporting for noncovered assets. They also describe optional reporting methods for qualifying stablecoins and specified NFTs. These are broker-reporting rules; they do not make a broker statement a complete ledger or remove the taxpayer’s responsibility to check the figures and report taxable activity.
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A 1099-DA may not arrive for activity outside the reporting rules or from a foreign broker. Whether a statement arrives does not decide whether the underlying transaction is taxable or reportable.
Which forms do individual investors generally use?
For a capital gain or loss, individuals generally report digital asset transactions on Form 8949 and summarize them on Schedule D, following the current instructions and any applicable 1099-DA reporting steps. A statement’s presence or format can affect how information is entered, so use the instructions for the tax year rather than assuming every transaction follows the same entry procedure.
Non-business ordinary income from digital assets is reported on the applicable individual return—Form 1040, 1040-SS, or 1040-NR—or Schedule 1, as relevant to the taxpayer and income. A receipt that is income and a later sale of the received asset can raise separate reporting questions: keep records for the receipt and for the asset’s subsequent disposition. Specific treatment depends on the facts; staking, mining, airdrops, and other rewards should not be treated as interchangeable categories without applicable authority.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Do I have to report crypto if I didn’t get a 1099?
Yes, if you had reportable digital asset income, gain, or loss. IRS guidance expressly says taxpayers must report digital asset income, gains, and losses whether or not they receive Form 1099-DA or another statement. Use your transaction records to identify the activity and calculate the amounts; do not wait for an information return to determine whether a transaction belongs on the return.
Do I check “Yes” on the digital asset question if I only held crypto?
The federal return’s digital asset question asks, in substance, whether during the tax year you received a digital asset as a reward, award, or payment for property or services, or sold, exchanged, or otherwise disposed of a digital asset or a financial interest in one. Merely holding crypto, without one of the listed receipts or dispositions, does not by itself appear to call for a “Yes” under that question. Read the exact wording and instructions for your filing-year return and return type; the wording can change.
When do these rules need a closer review?
This overview addresses ordinary federal reporting questions for individual investors; it does not resolve every transaction type or jurisdiction. Get fact-specific guidance where the activity involves complex DeFi transactions, staking, forks, gifts, business activity, disputed ownership, or incomplete records. Research state, local, and non-U.S. rules separately, because the federal treatment here does not establish the result elsewhere.
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