By GreenGrowth CPAs Tax Team · Updated October 2026 · Tax
Crypto tax reporting means listing every sale, swap, or spend of a digital asset on Form 8949 and Schedule D, and reporting crypto you earned as ordinary income. Yes, that includes losses, and yes, the IRS now gets broker data on Form 1099-DA to check your return.
The rules have shifted fast, with new broker forms and wallet-by-wallet basis tracking. This guide covers what to report, which forms to use, how gains are taxed, and what happens if you skip it.
QUICK ANSWER
Report every crypto sale, crypto-to-crypto trade, and purchase made with crypto on Form 8949 and Schedule D, including losses. Report staking, mining, airdrop, and payment income as ordinary income at fair market value when received. Buying with dollars and moving coins between your own wallets are not taxable. Answer the digital asset question on Form 1040 every year.
Crypto Tax Reporting: At a Glance
- Taxable events: Selling for dollars, trading one coin for another, and spending crypto on goods or services.
- Not taxable: Buying with dollars, holding, and moving coins between your own wallets.
- Ordinary income: Staking rewards, mining rewards, airdrops, and crypto received as pay, valued when you gain control.
- Broker reporting: Form 1099-DA reports gross proceeds for 2025 sales and cost basis for many assets acquired from 2026 onward.
Do I Have to Report Crypto Losses?
Yes. A loss is still a disposition, and Form 8949 asks for every disposition, not just the profitable ones. Reporting losses also lowers your tax bill. Net capital losses first offset capital gains. After that, up to $3,000 a year ($1,500 if married filing separately) offsets wages and other ordinary income. Any unused loss carries forward with no expiration date.
Take a common exam question. Sydney bought crypto, converted some to dollars, sold some, swapped Bitcoin for Ethereum, and bought a plane ticket with it. Which actions does she report? Every one except the original purchase. Each one is a disposition with its own gain or loss.
How Crypto Gains and Losses Are Taxed
The IRS treats digital assets as property. Your gain or loss equals what you receive minus your cost basis, which is generally what you paid plus fees. When you swap one coin for another, the value of the coin you receive counts as your proceeds.
Income Events: Staking, Mining, and Airdrops
Some crypto arrives as income. Under Rev. Rul. 2023-14, staking rewards are gross income at fair market value when you gain dominion and control over them. Mining rewards follow the same logic. Under Rev. Rul. 2019-24, an airdrop after a hard fork is income when you receive the new coins. A hard fork with no new coins creates no income.
That income value becomes your basis in the coins. Hobby-level rewards go on Schedule 1. Mining or validating as a business goes on Schedule C and can owe self-employment tax.
Form 8949 and Schedule D
Form 8949 lists each disposition with dates, proceeds, cost basis, and gain or loss. Totals flow to Schedule D. Starting with tax year 2025, Form 8949 has separate boxes (G through L) for digital asset transactions.
What Form 1099-DA Changes
Custodial exchanges and other brokers now issue Form 1099-DA. It reports gross proceeds for sales on or after January 1, 2025. For assets acquired in the same account from January 1, 2026, brokers also report cost basis. Coins bought earlier or moved in from another wallet often show no basis, so your own records fill that gap.
In April 2025, Congress used the Congressional Review Act to repeal a rule that would have required DeFi platforms to file 1099-DA forms. Trades on decentralized platforms remain taxable. You just will not get a form for them.
The Digital Asset Question
Form 1040 asks whether you received digital assets as a reward, award, or payment, or sold, exchanged, or otherwise disposed of any. If you only bought and held, or only moved coins between your own wallets, answer no.
Wallets and 1099-DA forms that do not agree? We can reconcile them.
Get Help →Short-Term vs Long-Term Capital Gains
Your holding period sets the rate. Hold a coin more than one year and the gain is long-term, taxed at 0%, 15%, or 20% depending on taxable income. Hold one year or less and the gain is short-term, taxed at ordinary income rates. The holding period starts the day after you acquire the asset.
Want to avoid capital gains tax on crypto? You can legally reduce it. Holding past one year, harvesting losses, and donating long-held coins to a qualified charity all help. For larger portfolios, our work with high-net-worth individuals folds crypto into estate and income planning.
▶ Crypto Tax Treatment Quick Reference
| Activity | Tax treatment | Where it goes |
|---|---|---|
| Sell crypto for dollars | Capital gain or loss | Form 8949, Schedule D |
| Swap one coin for another | Capital gain or loss on the coin given up | Form 8949, Schedule D |
| Pay for goods or services | Capital gain or loss on the coin spent | Form 8949, Schedule D |
| Staking or mining rewards | Ordinary income at fair market value | Schedule 1 or Schedule C |
| Airdrop after a hard fork | Ordinary income when received | Schedule 1 |
| Buy with dollars, hold, or move between own wallets | Not taxable | Answer the Form 1040 question |
What Happens If You Don't Report?
Unreported crypto rarely stays hidden. The IRS matches information returns to tax returns, so a 1099-DA with no matching entry tends to trigger a notice proposing more tax, interest, and penalties. Without basis records, the IRS may treat the full proceeds as gain.
IRS Enforcement Tools
Form 1099-DA is the newest tool. Courts have also authorized John Doe summonses requiring exchanges such as Kraken and Circle to produce US customer records. Public blockchains let analysts trace transfers between wallets. The Form 1040 digital asset question also puts your answer on the record under penalty of perjury.
Penalties
The accuracy-related penalty adds 20% of an underpayment caused by negligence or a substantial understatement, generally the greater of 10% of the correct tax or $5,000. Filing late adds 5% of unpaid tax per month, up to 25%. Fraud carries a 75% civil penalty and possible prosecution.
Missed crypto on a past return? Filing an amended tax return before the IRS reaches out usually costs far less than waiting. If a notice has already arrived, our tax controversy team can respond for you.
Wash Sale Rule and Crypto 2026
As of October 2026, the wash sale rule does not apply to crypto held directly. Section 1091 covers stock and securities, and crypto is property. So you can sell a coin at a loss, rebuy it right away, and keep the loss. Congress has proposed closing this gap, but the 2025 One Big Beautiful Bill Act did not.
One caution: crypto ETFs and tokenized stocks are securities, so the wash sale rule can apply to them. Confirm current law before harvesting losses at year end.
Record-Keeping
For every acquisition and disposition, keep the date, units, dollar value, fees, and the wallet or account involved. Save exchange statements, 1099-DA forms, and on-chain transaction IDs.
Wallet-by-Wallet Basis Tracking
Since January 1, 2025, basis must be tracked separately for each wallet or account. Rev. Proc. 2024-28 gave a one-time safe harbor to allocate unused basis across wallets as of that date. Crypto tax software can import exchange and wallet data, but review its output for missing transfers and duplicates.
Businesses That Accept or Hold Crypto
A business that accepts crypto records revenue at fair market value when received, and that value becomes its basis. Spending or selling the coins later creates a separate gain or loss. Crypto paid to employees is wages, subject to withholding and Form W-2.
Form 8300 and Digital Assets
The 2021 infrastructure law added digital assets to the definition of cash for Form 8300, which covers payments over $10,000. However, under IRS Announcement 2024-4, businesses need not count digital assets toward that threshold until final regulations arrive. As of our last check, they were not final.
Fair Value Accounting Under ASU 2023-08
ASU 2023-08 requires companies to measure most fungible crypto assets at fair value on the books, with changes running through net income. It took effect for fiscal years beginning after December 15, 2024. Our accounting and financial services team can set up that tracking. For the regulatory side, including how the SEC and CFTC split oversight, see our guide to crypto regulations.
KEY TAKEAWAYS
- ›Report every sale, swap, and spend of crypto on Form 8949 and Schedule D, including losses.
- ›Staking, mining, airdrop, and payment income is ordinary income at fair market value when you gain control of it.
- ›Brokers report gross proceeds on Form 1099-DA for 2025 sales and cost basis for many assets acquired from 2026.
- ›As of October 2026 the wash sale rule does not apply to crypto held directly, but it can apply to crypto ETFs.
Frequently Asked Questions
Reporting basics
Yes. Every sale, swap, or spend of crypto is a disposition, and you report each one on Form 8949 whether it produced a gain or a loss. Reporting losses works in your favor. Net capital losses offset capital gains, then up to $3,000 of ordinary income per year ($1,500 if married filing separately). Any loss you cannot use carries forward to future years. Skipping a loss gives up that deduction and leaves a gap the IRS may notice when a Form 1099-DA shows proceeds with no matching entry.
Unreported crypto usually leads to an IRS notice proposing extra tax, interest, and penalties. The accuracy-related penalty adds 20% of the underpayment tied to negligence or a substantial understatement. Not filing at all brings a failure-to-file penalty of 5% of unpaid tax per month, up to 25%. Willful evasion can lead to a 75% civil fraud penalty or criminal charges. If you missed crypto on a past return, filing an amended return before the IRS contacts you is usually the cheaper path.
How crypto is taxed
Usually, yes. The IRS treats crypto as property, so selling it, trading it for another coin, or spending it creates a capital gain or loss. Holding more than one year gets long-term rates of 0%, 15%, or 20%, depending on taxable income. Holding one year or less means short-term gains taxed at ordinary income rates. Staking rewards, mining rewards, airdrops, and crypto paid for work are different: they count as ordinary income at fair market value when received.
Report each sale, swap, or spend on Form 8949, then carry the totals to Schedule D of Form 1040. Crypto income such as staking or mining rewards goes on Schedule 1 as other income, or on Schedule C if it is part of a business. Every filer must also answer the digital asset question on page one of Form 1040. Starting with 2025 transactions, brokers send Form 1099-DA showing gross proceeds, and for many assets acquired from 2026 onward they also report cost basis.
Rules and enforcement
Not as of October 2026. The wash sale rule in Internal Revenue Code Section 1091 covers stock and securities, and the IRS treats crypto as property. So under current law you can sell a coin at a loss and buy it back without the loss being disallowed. Congress has proposed extending the rule to digital assets several times, and the 2025 One Big Beautiful Bill Act did not do it. The rule can still apply to crypto ETFs and tokenized stock, which are securities.
Yes. Custodial exchanges and other brokers now file Form 1099-DA with the IRS, reporting gross proceeds for 2025 sales and cost basis for many assets bought from 2026 onward. The IRS has also used court-approved John Doe summonses to get customer records from exchanges such as Kraken and Circle. Public blockchains show every wallet transfer, and the Form 1040 digital asset question puts your answer on record under penalty of perjury.
Where to Go From Here
Get Your Crypto Return Right
We reconcile your wallets and exchange records with Form 1099-DA, then file a return that holds up.
KEY NUMBERS
Crypto Taxes Reward Good Records.
We will review your wallets, exchange data, and 1099-DA forms before you file.
Book Your Free Consultation →GreenGrowth CPAs · Tax Team
General information as of October 2026, not tax or legal advice.
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