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For U.S. federal income tax, calculate gain or loss on a cryptocurrency sale by subtracting the units’ adjusted cost basis from the amount realized. The result is not simply the sale price: acquisition and sale costs, which units you sold, and how long you held them can all affect the calculation. This guide covers cryptocurrency held as a capital asset; other countries and some crypto activities may be treated differently.
Calculate the gain or loss for each disposition
The IRS treats digital assets as property for federal income tax purposes, so general property tax principles apply. A sale for U.S. dollars is a disposition; exchanging cryptocurrency for other property can also require a gain-or-loss calculation. The IRS summarizes a sale for dollars this way: “Your gain or loss on the sale of your digital assets for U.S. dollars or similar currency will be the difference between your adjusted basis in the digital assets and your ‘amount realized’ on the sale.” (IRS FAQ, answer A52, added December 15, 2025.)
For each disposition, use this formula:
Gain or loss = amount realized − adjusted basis
Do the arithmetic in U.S. dollars, using the transaction-time values and the units actually disposed of. A positive result is a gain; a negative result is a loss. The tax due is not necessarily the gain multiplied by one flat rate: the applicable tax depends on the taxpayer’s overall facts and return.
1. Identify the disposition and units sold
Record whether the event was a cash sale, an exchange, or another disposition. Identify the asset and the specific units involved, along with the transaction date and time. If only some of the same asset in a wallet or account was sold, the applicable unit-identification rules and supporting records can affect which basis is used.
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2. Determine adjusted basis
For purchased cryptocurrency, basis generally starts with its cost in U.S. dollars. The IRS’s 2025 Form 8949 instructions state that digital-asset basis includes acquisition cost plus transaction fees, commissions, transfer taxes, and other acquisition costs. The basis of units received as income or through another event may have a different history, so do not assume all units of an asset share the same basis.
3. Determine amount realized
For a cash sale, amount realized generally includes the cash received and the fair market value of any services received to effect the sale, reduced by allocable digital-asset transaction costs. Report the calculation in U.S. dollars. The applicable costs depend on what the fee paid for; a transfer between your own wallets is not automatically a sale cost.
4. Subtract basis from amount realized
Once the basis and amount realized for the units are established, subtract basis from amount realized. Keep the calculation tied to those units and that disposition rather than using an account-wide average without confirming that the applicable rules allow it.
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5. Classify the holding period
For a capital asset, a holding period of one year or less is short-term; more than one year is long-term. Use the acquisition and disposition history of the units involved. The IRS explains the classification and related reporting in its digital asset FAQ.
Worked example: account for acquisition and sale costs
Suppose, hypothetically, you bought a unit for $1,000, paid $10 in qualifying acquisition costs, later sold it for $1,500, and paid $15 in qualifying sale costs:
- Adjusted basis: $1,000 + $10 = $1,010.
- Amount realized: $1,500 − $15 = $1,485.
- Gain: $1,485 − $1,010 = $475.
This is an arithmetic illustration, not an IRS-published statistic or a complete tax-return determination. The actual result depends on establishing the units, basis, allowable costs, and tax classification from the records and applicable rules.
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Which crypto fees count in the calculation?
The IRS describes digital-asset transaction costs as amounts paid for services to effect a purchase, sale, or disposition. Examples include transaction or “gas” fees, commissions, and transfer taxes. Acquisition costs can be included in basis, while allocable costs of a sale can reduce amount realized. Keep fee records and connect each fee to the transaction it relates to.
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How to identify units and keep basis records
For a defensible calculation, retain records that establish what was acquired, what was disposed of, when it happened, the units involved, their U.S.-dollar fair market value at the transaction time, and their basis. The IRS instructs taxpayers to keep records of purchases, receipts, sales, exchanges, and other dispositions (IRS digital asset FAQ).
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Specific-identification rules depend on the transaction period and whether units are in a hosted or unhosted wallet. If you sell only part of your holdings, follow the IRS rule that applies to your circumstances and keep the supporting records. If the units are not specifically identified under the applicable rule, a default identification rule may apply. Do not assume that first-in, first-out always applies; check the current FAQ and the facts of the transaction.
A useful record set includes exchange or wallet statements, transaction IDs, dates and times, quantities, dollar values, acquisition records, and fee details. Reconcile transfers so an internal move between your own wallets is not mistaken for a sale or treated as though it created a new purchase.
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Report the disposition on the correct tax-year forms
For a capital-asset disposition, the IRS directs taxpayers to report using Form 8949 and Schedule D. Use the forms and instructions for the return year being filed; box mappings can change. The 2025 Form 8949 instructions added boxes G, H, and I for short-term digital-asset transactions and J, K, and L for long-term digital-asset transactions (2025 Instructions for Form 8949).
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What Form 1099-DA changes—and what it does not
Broker reporting on Form 1099-DA begins for covered transactions on or after January 1, 2025. Covered brokers include certain custodial platforms and other providers that take possession of assets in covered sale or exchange transactions. Whether a broker statement reports proceeds or basis, reconcile it against your own complete records.
The 2025 Form 8949 instructions say that certain transactions may not need Form 8949 when all applicable broker statements report basis to the IRS and no correction or adjustment is needed. Check the instructions for the return year and the transaction’s circumstances before relying on that exception; receiving a broker form does not establish that every basis or unit-identification detail is correct.
When this calculation is not the whole tax answer
This method assumes cryptocurrency is held as a capital asset. Crypto held for sale to customers in a trade or business, compensation, staking or mining rewards, and other receipt circumstances can involve ordinary income, business reporting, or a separate basis calculation before a later sale. The tax treatment of the receipt and the calculation on a later disposition are separate questions.
The guidance here is limited to U.S. federal income tax. It does not establish state or local treatment, and it should not be applied as a universal rule for taxpayers in other countries. The IRS distinguishes transactions before January 1, 2025 from those on or after that date in its digital asset FAQ; check the guidance and forms applicable to the transaction and return years.
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