How crypto is taxed in the U.S. (2026)

1. Crypto is property, not currency

The IRS treats digital assets as property. Selling, swapping one coin for another, or spending crypto on goods is a taxable disposal: you owe tax on the gain (or can claim the loss) versus what you paid. Buying with dollars and holding is not taxable by itself.

2. Short-term vs long-term

Held one year or less: the gain is taxed at your ordinary income rate (10% to 37%). Held more than one year: long-term rates of 0%, 15% or 20% depending on taxable income. Higher earners may also owe the 3.8% net investment income tax. Estimate yours with 2026 brackets.

3. The yes/no question on Form 1040

Every filer must answer the digital asset question near the top of Form 1040. You answer "Yes" if during the year you received digital assets (as payment, reward or award) or sold, exchanged or otherwise disposed of them. Only buying and holding, or moving between your own wallets, is generally a "No".

4. Form 1099-DA from brokers

Custodial platforms report digital asset sales on the new Form 1099-DA. For 2025 transactions they report gross proceeds; starting with transactions in 2026 they also report cost basis for assets acquired in the account. Your own records still matter, especially for transfers in from other wallets.

5. Where it goes on your return

Sales and swaps go on Form 8949 and total on Schedule D. Crypto received as income (staking rewards, mining, airdrops, pay for work) is ordinary income at its fair market value when you receive it, usually reported on Schedule 1 or Schedule C if it is a business.

6. Choosing lots: FIFO, LIFO, HIFO

Which purchase you are selling changes your gain. Compare methods on your own trades; the file stays in your browser. Ask a tax professional which method you can use for your accounts.

7. Losses

Capital losses offset capital gains first; up to $3,000 a year ($1,500 married filing separately) can offset other income and the rest carries forward.