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Taxation of digital assets: how the United States taxes crypto
The federal rules rest on one decision made in 2014: digital assets are property. Nearly everything else — which events are taxable, what you report, why records matter so much — follows from that.
The short answer
The United States taxes digital assets as property, not as currency. Selling one, exchanging it for another, or spending it is a disposition that produces a capital gain or loss, measured as what you received minus what you paid. Receiving digital assets as payment, or as mining or staking rewards, is ordinary income when received.
That single classification, set out in Notice 2014-21, is the foundation of the entire regime. It is also why digital asset tax is harder in practice than it sounds in principle: property accounting requires knowing what you paid for each unit, and that is precisely the record most people do not have.
What counts as a digital asset
The statutory definition turns on the technology, not on whether something is electronic. A digital asset is any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology.
| Is a digital asset | Is not |
|---|---|
| Cryptocurrency — bitcoin, ether, and the rest | Dollars in a bank account |
| Stablecoins | Shares held electronically at a brokerage |
| Non-fungible tokens | Airline miles, store credit, game currency off-chain |
The line matters more than it used to, because it now determines who has to report what. Tokenized instruments recorded on a distributed ledger can fall inside the definition, and that boundary is still being worked out.
Which events are taxable
The common misconception is that tax applies only when you cash out to dollars. It does not.
| Event | Tax treatment |
|---|---|
| Buying with dollars and holding | Not taxable. Sets your basis. |
| Moving between wallets you own | Not taxable. But it breaks your broker’s basis record. |
| Selling for dollars | Capital gain or loss. |
| Trading one digital asset for another | Capital gain or loss — a disposition, even though no dollars were involved. |
| Spending it on goods or services | Capital gain or loss on the asset you spent. |
| Mining or staking rewards | Ordinary income at fair market value when received. |
| Paid in digital assets for work | Ordinary income, like any other compensation. |
A crypto-to-crypto trade is a taxable disposition. No dollars change hands, and the tax is still real.
Whether a gain is short-term or long-term depends on how long you held the asset, which our guide to 2026 rates works through.
What you report, and where
- The Form 1040 question. Since the 2019 tax year, the individual return has asked every filer whether they received or disposed of a digital asset during the year. It is answered whether or not you owe anything.
- Form 8949 — every disposition, with its date acquired, date sold, proceeds, and basis. This totals into Schedule D.
- Ordinary income from mining, staking, or compensation is reported like other income of that kind.
- Form 1099-DA — what your broker tells the IRS. Gross proceeds for 2025 transactions; cost basis for covered assets from 2026. You do not attach it; you reconcile against it.
Why compliance is harder than the rules suggest
Property accounting needs a purchase record for every unit disposed of. Digital asset history is scattered across exchanges that close, wallets that move, and platforms that never issued a statement. The National Taxpayer Advocate has told Congress that record reconstruction is the principal barrier to compliance, and that taxpayers who want to fix past errors lack a clear roadmap for doing so.
The scale of the gap is measurable. Academic work published in 2026 estimates that between 12 and 21 percent of U.S. adults held cryptocurrency at some point over a nine-year period, while only 6.5 percent of taxpayers reported cryptocurrency sales to the IRS across the same period. Not every holder has a taxable sale in a given year — but the distance between those two figures is the compliance problem in one line.
Jeffrey L. Hoopes, Tyler S. Menzer and Jaron H. Wilde, “Who Reports Cryptocurrency to the IRS?”, 31 Review of Accounting Studies 453 (2026).
Two pieces of transition relief matter while the reporting system matures. Rev. Proc. 2024-28 gave a safe harbor for allocating pre-2025 basis across wallets and accounts, and Notice 2026-20 extends relief on specific identification of units through December 31, 2026. Both are covered in our cost basis guide.
Where to go next
Form 1099-DA
What brokers now report to the IRS about your sales, and on what timeline.
Cost basis
The number that turns a sale price into taxable income — and how to reconstruct it.
Rates for 2026
Holding periods, the capital gains brackets, and what is taxed as ordinary income.
Common questions
Taxable events, crypto-to-crypto trades, staking income, and stolen funds.
IRS letters
Letters 6173, 6174 and 6174-A, and CP2000 notices, decoded.
Unreported years
What the law currently offers taxpayers who have fallen behind.
Common questions
What is a digital asset for tax purposes?
The Internal Revenue Code defines a digital asset as any digital representation of value recorded on a cryptographically secured distributed ledger or similar technology. That covers cryptocurrency, stablecoins, and non-fungible tokens. It does not cover assets that merely exist in electronic form — shares held in a brokerage account, dollars in a bank account, or airline miles are not digital assets.
How are digital assets taxed in the United States?
As property, not as currency. Under Notice 2014-21 the general tax principles applicable to property transactions apply to digital assets, so selling, exchanging, or spending one is a disposition that produces capital gain or loss measured against your cost basis. Assets received as compensation, mining, or staking rewards are ordinary income when received.
Do I have to report digital assets if I did not sell anything?
Buying and holding is not a taxable event, and neither is moving assets between wallets you own. But Form 1040 asks every filer whether they received, sold, exchanged, or otherwise disposed of a digital asset during the year, and that question must be answered truthfully whether or not you owe tax.
Which tax forms are used for digital assets?
Dispositions are reported on Form 8949, which totals into Schedule D. Ordinary income from mining, staking, or payment for services goes on the return like other income. Brokers report your sales to the IRS on Form 1099-DA — gross proceeds for 2025 transactions, and cost basis for covered assets from 2026.
Are stocks or tokenized securities digital assets?
Ordinary shares held electronically are not digital assets — the definition turns on whether the value is recorded on a cryptographically secured distributed ledger, not on whether the record is electronic. Tokenized instruments that are recorded that way can fall within the definition, which is an area where the rules are still developing.
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This page is educational and does not constitute tax or legal advice for your specific situation. For questions about your own filings, consult a qualified tax professional.
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